Are you considering a merger or acquisition as the best solution for your business’ growth or exit plan? As shared in last month’s blog post When Mergers and Acquisitions Make Sense, mergers and acquisitions (M&A) can provide a more efficient, cost-effective way to grow a company, whether it’s by adding people, processes, or products. M&A can also be the perfect way to secure the financial goals you have for yourself and your family as you exit the company you built.
Being proactive and creating a simple M&A strategy sets you up to use your time wisely and to secure a financially-beneficial deal. It is wise to review these top six mistakes business owners make when considering a merger or acquisition and how to prevent them as you create your own strategy:
1. The merger myth.
You hear it all the time: “mergers and acquisitions.” However, there are few true mergers. Merging two companies almost always results in one company acquiring the other. Why? It all boils down to the fact that there can only be one true leader, one chief.
Consider this an acquisition, not a merger. Are you being acquired or are you acquiring? Who will be the leader? Addressing this in the beginning avoids tension down the line.
2. Neglecting the “why.”
If you do not have a strong grasp of M&A goals, you may move forward with a deal that does not help you achieve your goals or, worse yet, moves you further from your desired results.
Your very first step in the process is identifying your goals. Determining when mergers and acquisitions make sense can help you along this process.
3. M&A target ignorance.
Not spending enough time identifying targets that help you achieve growth or exit-plan goals means wasting both time and money on negotiating with the wrong potential partners.
Before you find yourself responding to interested parties, identify who you believe would be the best match for your company.
4. Overlooking people and process changes.
Which roles will be duplicated? What will happen to the people in those jobs now? Which company’s process will be used for which tasks? Not answering these questions before they’re asked puts your company into a state of turmoil, creating unhappy team members and risking losing the exact talent you are attempting to acquire.
Plan for changes in people and process. Be transparent with all involved. Communicate plans to reduce tension and create internal support.
5. Emotion-driven decision-making.
It is easy to get drawn in by a strong connection with people you would love to do business with. Pressure to find a solution to growth or exit planning issues can make a deal look more attractive than it truly is.
Involve objective advisors from the start to guide you with an unbiased, impartial perspective.
6. Underestimating time.
Having unrealistic expectations about the time involved in the M&A process can frustrate you and the other people involved and create rushed decisions. Both parties involved will be interrupted with the challenges and responsibilities of running their businesses. As time goes on, expectations and projections can change, requiring everyone to maintain flexibility throughout the process.
Stay grounded and realistic in your expectations around the pace of the process. Lean on your advisors to take some of the work load.
The M&A process is an adventure, one that can end with a new entity that helps all involved meet goals or with one or all parties regretting their choices. To have a successful M&A process, be proactive rather than reactive. Understand when mergers and acquisitions make sense. Prevent the six common M&A mistakes. And involve objective advisors from the start.
If you’re considering a merger or acquisition, contact Cray Kaiser today. We can help you review your options.