Top Things To Consider Before You Commit To A Merger
Updated: Mar 19
The following is an article “Top Things To Consider Before You Commit To A Merger” by Marc Primo.
There’s a myriad of considerations you have to take first before you forge into a partnership with another private company. These involve legalities, employee welfare, copyright issues, financial and business aspects just to name a few and brushing up on the dynamics of the process can really help you go into a win-win situation.
Here are some of the most pressing issues that you may want to take into account before you commit to a merger.
Negotiation. If you are the seller in a merger and acquisition deal, make sure you thoroughly review your company’s value vis-à-vis the buyer’s offer price and prepare yourself for counter negotiations. Review your competitors’ values as well in terms of EBITDA and growth, and whether your buyer is buying for profit or strategy. This will help you draw up a reasonable offer for your company’s value. Remember that buyers do not always lay out the best offers in the first draw, so feel free to counter negotiate with the buyer as you deem necessary.
Manage Time. Accept that merger deals could take time with some even taking up to years to effect. As a seller, make sure that you do your part in organizing your key accounts, company records, financial statements, and all relevant materials that will be needed to effect the merger. Prepare your draft disclosure early to streamline processes and appoint an able and experienced lead negotiator who can be involved in your company’s decision-making process.
Investigate. As a seller, expect the buyer to perform its due diligence functions including a corporate investigation of your company. Do not be alarmed should your company have some liabilities or crisis issues in the past. Companies often experience some form of problems all the time. Take note that the buyer already has interest in your business, which is the very reason why they are looking into your company. All you have to do is set up an online or physical data storage to keep all your company documents such as contracts, copyright data, and human resources information, among others. This way, you have proper control on which files you need for the merger without compromising confidentiality.
Hire a good lawyer. Hiring an outside counsel that is well versed in merger and acquisition deals will ensure that you have the entire playing field cover. From tax, to employee matters, to international trade, having a good lawyer who knows how these deals work gives you the needed security to protect your company’s assets. What transpires in a merger is usually fast-paced and can involve complicated issues and structures. Having someone who has a good grasp in both business processes and the law can lead you to a sound agreement with your buyer. Despite having to spend on legal fees, the returns in hiring a proficient lawyer during your merger process can be more beneficial to you in the long-term.
Hire a good investment banker as well. Like a very capable lawyer, a good investment banker brings significant contributions to the merger deal table. This expert will help you design the entire sales process by drafting an executive summary and entailing confidentiality agreements. You can also rely on them to do most of the legwork in terms of price negotiations and deal terms, as well as company presentations to your potential buyers.