Mergers & Acquisitions
Mergers and acquisitions
Many people know the stats - most M&A deals in the U.S. have been shown to lose value for the buying shareholders. There are many reasons for this.
In my last company, I managed to buy two companies and integrate them into my company. There were many lessons from this experience. I will focus on the negotiation aspect first, then discuss the actual integration on companies later.
Targeting & Negotiating
1) Understand why your company is acquiring companies.
- Is it to solely to grow the revenues?
- Do you have a target that you believe will perform better on your platform/using your processes and procedures?
- Are you trying to expand your product/service into other areas?
2) Coupled with this question is the next step - is it better to buy then make
- Is organic growth not good enough
- Is there a large benefit to an acquisition that will outweigh the efforts and risks of going through the buying process, because the buying process is usually very long and fraught with downfalls (which is why most M&A deals fail for the shareholders)
3) Once you have gone through these initial questions and decided that an acquisition makes sense, then the next step is targeting.
How do you find the company/ies that you want to buy?
Depending on the size of the company you are looking to buy, there are a few channels:
1) broker/dealers
2) investment banks
3) industry associations
Broker/dealers are a tough bunch. Think of some of them as car salesmen. Sometimes you can find one that is knowledgeable and willing to help you find a great deal. But in many cases, you, as the buyer, are not whom they are concerned with. The dealer's focus will either be with the seller or will be on just getting a deal done. When that happens, be AWARE!
Investment banks are only an option if you're looking at much large companies or a major roll up of an industry.
Industry associations are a good source in some cases, but if you're viewed as an outsider, you won't get as much help. Build these relationships. Attend the events.
4) Calling targets
Obviously make sure that you have a solid script/message when you call. Get the right person. Establish trust. Get an initial meeting set up.
5) Negotiations
This is usually the longest (and most important) aspect of M&A. Depending on what you leave on the table (and how long the process takes) will ultimately decide the success or failure of the whole deal. Have lawyers that are familiar with M&A deals (I have a few suggestions if you want them), that are careful, but will help get the deal done. Try and meet with the lawyers and accountants of the targets (obviously with your potential partners there). Set the tone. Make sure that everyone knows that what is trying to be accomplished is a win-win. You want the negotiation to go as efficiently as possible and as positively as possible. When it is all said and done, you are still going to need to rely on the people whose company you just bought. You do not want unhappy or frustrated partners.
6) Get a term sheet done and get as many of the major issues completed there. Don't leave it until the actual contract.
Once you've got a contract done, meet with your team and have a review of the process. What went right, what went wrong. Make the next time even better.
One of the next issues/topics - the integration
Many people know the stats - most M&A deals in the U.S. have been shown to lose value for the buying shareholders. There are many reasons for this.
In my last company, I managed to buy two companies and integrate them into my company. There were many lessons from this experience. I will focus on the negotiation aspect first, then discuss the actual integration on companies later.
Targeting & Negotiating
1) Understand why your company is acquiring companies.
- Is it to solely to grow the revenues?
- Do you have a target that you believe will perform better on your platform/using your processes and procedures?
- Are you trying to expand your product/service into other areas?
2) Coupled with this question is the next step - is it better to buy then make
- Is organic growth not good enough
- Is there a large benefit to an acquisition that will outweigh the efforts and risks of going through the buying process, because the buying process is usually very long and fraught with downfalls (which is why most M&A deals fail for the shareholders)
3) Once you have gone through these initial questions and decided that an acquisition makes sense, then the next step is targeting.
How do you find the company/ies that you want to buy?
Depending on the size of the company you are looking to buy, there are a few channels:
1) broker/dealers
2) investment banks
3) industry associations
Broker/dealers are a tough bunch. Think of some of them as car salesmen. Sometimes you can find one that is knowledgeable and willing to help you find a great deal. But in many cases, you, as the buyer, are not whom they are concerned with. The dealer's focus will either be with the seller or will be on just getting a deal done. When that happens, be AWARE!
Investment banks are only an option if you're looking at much large companies or a major roll up of an industry.
Industry associations are a good source in some cases, but if you're viewed as an outsider, you won't get as much help. Build these relationships. Attend the events.
4) Calling targets
Obviously make sure that you have a solid script/message when you call. Get the right person. Establish trust. Get an initial meeting set up.
5) Negotiations
This is usually the longest (and most important) aspect of M&A. Depending on what you leave on the table (and how long the process takes) will ultimately decide the success or failure of the whole deal. Have lawyers that are familiar with M&A deals (I have a few suggestions if you want them), that are careful, but will help get the deal done. Try and meet with the lawyers and accountants of the targets (obviously with your potential partners there). Set the tone. Make sure that everyone knows that what is trying to be accomplished is a win-win. You want the negotiation to go as efficiently as possible and as positively as possible. When it is all said and done, you are still going to need to rely on the people whose company you just bought. You do not want unhappy or frustrated partners.
6) Get a term sheet done and get as many of the major issues completed there. Don't leave it until the actual contract.
Once you've got a contract done, meet with your team and have a review of the process. What went right, what went wrong. Make the next time even better.
One of the next issues/topics - the integration
posted by John F Martin at 11:49 AM
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