How to Get Ready for Mergers & Acquisitions
In today’s business environment, companies change ownership frequently as larger organizations seek to expand their footprint. This is usually a good thing; a company that is buying and performing mergers & acquisitions has money in the bank and is ready to bring resources to bear. That said, the process of acquiring and assuming the responsibility of a business is complicated. Here are the best ways to prepare, regardless of which side of the transaction you are on.
Terms of the Deal
Perhaps the biggest sticking point in the selling of a company is, understandably, the terms of the deal. It’s not much of an exaggeration to say that mergers & acquisitions come with an endless barrage of regulatory to-do lists and disclosures, but certain typical items are frequently up in the air. Without getting too deep into the minutiae of the deal, it’s important that both sides agree upon the Escrow terms, liabilities, and closing costs.
Transfer of Employees
It’s one thing to be working in mergers & acquisitions to buy and sell businesses. It’s another entirely to work for a company that’s in transition and try to maintain quality and consistency under uncertainty. When acquiring a new business, companies have the difficult responsibility of keeping employees motivated while appropriately communicating what will and will not change. Failure to do this can set up years of confusion or resentment.
Appropriate Disclosures from the Selling Company
Companies that are buying other entities must be upfront with their assets and liabilities. That may sound like common sense, but it’s crucial to be extremely thorough, as deals can hinge upon even the tiniest disclosure, especially if the company being acquired is not in a motivated position where they are compelled to sell.
Negotiations and Letters of Intent
The negotiations for the company’s sale should be conducted by a mergers & acquisitions committee or board to avoid conflicts of interest. A legally binding letter of intent should be submitted 30 to 60 days prior to closing.
Keeping Business Running
Finally, it’s imperative for the buying company to keep operations running normally during the sale period. We’ve talked about keeping employees in the know, but an acquiring entity must also assure its vendors, clients, and investors that business will continue without interruption or significant loss of staff or quality.
The process of changing ownership is involved and complicated, but half the battle is knowing that it will be a marathon, not a sprint.
