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In the financial press, articles about mergers and acquisitions that take place in SMEs and large corporations are published each day. While boosting revenue or gaining exposure to a new customer base are usually the primary motivations for businesses to enter into M&A however, it is crucial that they have a well-thought-out strategy to ensure their success.
A successful M&A is a complex process, and the end result is dependent on a number of factors that both parties must take into consideration. A well-run management team is crucial to ensuring that your business can be successful in the M&A process. Employing trusted external consultants and accountants who can aid with this process will add to the overall credibility of your M&A strategy.
The first step in the process is to perform an exhaustive financial health check on your business. This includes looking over profit and loss statements, assessing cash flow as well as analyzing debt/equity ratios and determining if you have the ability to fund an M&A deal. The financial health check will reveal any discrepancies between your Management Accounts and Statutory filed accounts, which can cause confusion for a buyer.
Another important aspect is to think about the cost of integrating both businesses. It could be physical costs like the merging of offices, systems and employees, or it could be human capital costs such as calculating the cost of compensation and benefits programs. By involving experts in human capital early in the process, you will be able to precisely assess the costs and incorporate them into your price negotiations.