How to Execute A Successful Merger and Acquisition
Mergers and acquisitions are relatively common in Canada. You’d be surprised to know that since 1985, over 63,000 M&As have taken place, resulting in a total value of over 3,000 billion Canadian dollars. If your company is planning an M&A, here are some tips to make it easy and successful:
One of the main reasons why most mergers and acquisitions fail is the lack of careful strategic planning. Just because you want to buy a company doesn’t mean it’s always a great decision. The key is to do your research and ask yourself a couple of critical questions. Think of the business objective behind the merger? What value will it bring for you and your target company? Would the target company culture align well with your company? Will this business decision give you any sort of advantage in the current market? Addressing this type of questions will narrow down your search, screen the prospective companies, and help you determine the kind of structure deals you want to invest in.
According to Investopedia, synergy refers to the idea that two companies’ cumulative value and performance will always exceed the sum of their individual parts. It refers to combing your actions and operations in a way that improves workflow and drives value. Other than that, obtaining synergy helps you restructure workflows, eliminate redundancies, and achieve strategic advantages in your niche.
Synergy also helps you control your costs. When two companies consolidate their operations, their aim should be to improve the purchasing power and negotiate prices better. An increased output puts you in a better position to negotiate pricing terms with the vendors. Through appropriate synergy, you can also seek the benefits of the acquired company’s target market. It helps you cash in on market segments that were previously inaccessible to you.
Although mergers and acquisitions may sound like a managerial decision, it’s mostly a financial transaction. You need to consider whether your company has adequate financial resources and stability to undertake such an investment. Start by evaluating your liquidity position and analyzing the profit and loss statements. It’s also advisable to review your capital structure as well. This will help you ensure that your company can handle the added strain and there is enough capital to finance the merger.
Mergers and acquisitions can result in costly mistakes if you don’t have the right guidance. Faber LLP will offer the right advice and assistance regarding the pre-and post-reorganizations. Get started if you’re based in Edmonton.