As business leaders continue to battle with unrelenting staffing and supply chain issues, they are turning their attention to mergers and acquisitions as a solution for overcoming these immediate barriers to business success while achieving expansion and growth.
In this article, I’ve outlined the benefits of merging or acquiring other businesses while shining a spotlight on important, and often-overlooked matters, which can impact successful outcomes.
In the wake of the global COVID shutdown, business leaders confronted with supply chain uncertainty and a disrupted workforce, have substantially increased their interest in mergers and acquisitions (M&A). And for good reason.
As long-term staff continue to leave their employers taking with them years of experience and knowledge coupled with an inability to attract candidates to fill vacancies at all levels, the impacts on productivity and profitability are likely to be felt for some time to come.
Merging to gain access to valuable labour resources, expertise and IP (especially for businesses that have relied on immigration) or acquiring an aligned supply company to control access to key materials, is now a prospect worth serious consideration.
Merging or acquiring businesses has traditionally delivered a range of benefits: synergies, economies of scale, increased market share and diversification, and I’d suggest each of these matters are very high on many business leaders’ list of priorities right now.
While proactive business leaders are on the hunt for quality businesses, there’s no shortage of business owners who are ready to sell either, I’ll address that in a coming article.
Of course, effective M&A isn’t a quick fix solution. Nor is it easy.
For business leaders, aggressively exploring a merger or acquisition, may well be an experience that’s new to you. It’s not every day you purchase a valuable business or entity to add to your existing operations.
Much of the process will involve sorting the wheat from the chaff, identifying suitable businesses and this involves time and considerable expense.
Getting advice early is the key.
Successful mergers and acquisitions largely rest on a complete and thorough due diligence, valuing the business to determine an accurate and realistic purchase price, establishing cultural fit then correctly documenting the transaction to protect yourself once a target business or entity has been established.
While these are among the obvious considerations, hidden amongst the details can be issues relating to key contracts.
For example, a ‘change of control’ clause written into a major customer or supplier contract needs to be addressed and ongoing terms of agreement resolved prior to the M&A transaction completing.
Your advice team needs a lawyer, but specifically one who specialises in M&A and who will be instrumental in guiding the process, keeping negotiations moving and finding resolutions when they stall.
A proactive and experienced M&A lawyer will provide insight that will ensure time and money is used as effectively as possible, bringing the transaction to completion, then sticking around to manage retention clauses and such, for protecting your financial investment and the promises made by the seller are honoured.
Next steps
If you are contemplating a merger or acquisition, we suggest you involve your advisors at the earliest possible stage and come prepared with the following information:
- The type of target businesses you are looking for
- Any location issues or preferences
- Your acquisition budget, and
- Any other matters you are considering
Knowing your plans in advance can allow your lawyers, accountants and financiers to work together on a plan that will help you identify the best target businesses, undertake due diligence in the most efficient manner possible and to negotiate the best possible price and contract terms for any potential acquisition.
For more information about mergers and acquisitions please contact Zac Herps on +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au
Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.
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The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.
