Acquisitions and Mergers
Strategies for Successful Acquisitions and Mergers
Acquisitions and mergers can bring big profits to companies but all-too often this is not the case because acquirers fail to notice some key problems that could be avoided. I recently read a relevant article on some common pitfalls for mergers and acquisitions that lead to big losses and big wastes for both parties involved. Today's post focuses on some of these problems and simple resolutions that can lead to successful mergers and acquisitions. The following issues are especially relevant to private equity groups in acquisitions.Problems and Solutions for Company Acquisitions and Mergers
- Poor Match: There have been many mergers and acquisitions that have failed because the companies simply don't match; either operationally 0r strategically, and sometimes because the products and services of the companies are too different. When a company strays outside of its territory it can sometimes lead to poor performance. So, when considering a merger or acquisition, be realistic of the weaknesses and difficulties in taking on the other company.
- Give the People What They Want: A common problem in mergers and acquisitions is that the acquirer brings on the other company's staff but assumes that they will work as productive and contently in your completely different work environment. Different firms have different work environments and cultures that you should be sensitive to in a takeover. Taking into consideration the factors that make these professionals productive could save you some two week's notices and hopefully improve your company as a whole.
- Conducting Strict Due Diligence: Due diligence is a crucial aspect of Mergers and acquisitions, and if performed rigorously it saves a lot of time and trouble by catching potential issues and problems early. Conduct this process to the greatest degree possible but know that there are some problems that come up unexpectedly regardless.
- Betting the House: The implicit hope in a merger or acquisition is that it will benefit your company, but many deals end up hurting the acquirer. An example could be a high-growth rate company taking on a steady but slow-growth rate company, which could slow down the high-growth company and have a negative impact on business and profits. The idea is to be careful that conducting a merger or acquisition won't end up negatively impacting your firm's success. Another problem for your company could be simply betting too much on the success of the merger or acquisition, to the point that even a moderate failure can end up really hurting your firm. The typical case of this is a leveraged buyout that uses too much debt so that anything but a highly profitable success ends up costing the buyer more than it makes from the merger or acquisition.
- You Gotta Give a Little...Or a Lot: An acquisition is typically a major deal that requires the acquirer to give a large amount of resources in order for the acquisition to be beneficial. Don't think of it as sacrificing your resources, think of it as re-investing in your company because it's really adding value to a company that you are very much invested in. So adequately allocating resources for every stage of the deal is connected to, rather than separate from your business--from due diligence to structuring the deal to incorporating the firm into your company.
Source: Bruce R. Evans is the Managing Partner at Summit Partners' Boston office. His article offers key points of success and failure in Mergers and Acquisitions.
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Link to This Resource: Acquisitions and Mergers
http://privateequityblogger.com/2008/10/acquisitions-and-mergers.html