There are several reasons why acquisitions are so popular among businesses, one of which being the obvious: with the advent of digitized economies, the world is becoming a smaller place. According to studies and trend forecasters, as Baby Boomer business owners begin to retire and sell their firms, the numbers will rise. It takes planning and thought to acquire any new business.
1. Is acquisition the best way forward? Before a company decides to buy another firm, it should consider the following factors: The need for acquisition must first be considered by businesses. While growth is one of the main drivers for acquisition, there are two kinds of growth: organic and inorganic (through market expansion, product lines or greater productivity).
Maintain a level of control. This, by the way, is one area where you’ll need to be precise: because the concepts that formed your industry narrative may change, your brand’s positioning will have to adapt as well.
1. Before embarking on a merger and acquisition (M&A) strategy, enterprises should be certain of synergies.
2. Is there Clear Due Diligence? As you can see, the end result of a merger is to improve the combined company’s financial performance. However, to ensure that a reasonable price and valuation are obtained before the acquisition, careful due diligence must be carried out. The two values need to be considered simultaneously. To determine whether the firm is appropriately valued.
When analyzing a firm’s profitability, consider both the apparent cash flows needed to operate it and the intangibles, such as effort, resources, and time – put a number to it and look at it in terms of the whole picture. When assessing service firms, intellectual property (IP) or human capital is crucial. Valuing brands and other intangibles. Keep an eye on any flaws in the Financial/Legal Due Diligence. When a firm is acquired, many skeletons come out of the closet. Daiichi-Sankyo’s acquisition of Ranbaxy Laboratories is a good example.
Put on your detective hat and make sure the reasons given for the sale are strong enough to persuade you, as a business owner, that it’s time to move on. Look for any warning flags, such as discrepancies between stakeholders in their reasons for selling. If you can, carry out an informal poll of their existing client base, rivals, and suppliers.
3. How strong is the brand? When attempting to understand a company’s market penetration, two key factors to examine are consumer and market segments. What do customers think about it? In terms of overall standing in the market, what is the product / service’s position? Has anything extraordinary happened in the recent past? When compared to its competition. What will happen if the company is acquired? You may need to maintain the target brand separate in order to avoid perplexing the consumer, who is accustomed to using it. Adidas’ acquisition of Reebok and Tata Motor’s purchase of Jaguar are good examples of keeping target brands distinct.
4. Is there any paperwork I need to complete? Are there any regulatory restrictions or concerns? What are the key benefits of working with us? Is there anything more I must do? Regulatory limitations are by far the most important consideration in deals, especially international ones. Because certain countries’ laws and policies differ across
5. What will you use to pay for it? Once you and the seller have determined a reasonable selling price, determine where the money will come from to make this purchase. Is there enough cash in the company to finance such a deal? Will it be an asset or equity buy? Is there any chance that the capital will come via equity or debt.
6. Is it critical to retain employees? Identifying the best approach would entail speaking with the company’s human resources/talent acquisition director and stakeholders. List down the top candidates and interview them (this may be difficult in a takeover). Attrition, in particular, is one of the most common causes of failure, as well as cultural differences. For all of the above, having expert assistance at various stages is critical, MergerDomo.com, which has a partner pool of consultants including investment bankers, attorneys, and lenders, not only helps you plan for acquisitions but also helps you locate candidates and carry out the deal.