Companies often follow a merger and acquisition route as an exit strategy. This is the most crucial stage in determining the ultimate success and financial well-being of the entrepreneurs. Unfortunately, things don’t always go well in their execution and can even go horribly wrong. The following tips act as a guide on how to avoid potential pitfalls during the execution of an M&A:
- Make sure there is a proper fit between the companies. The warning signs that need to be recognized, resolved and managed are where different cultures and strategies exist.
- Don’t sell or merge your business for the wrong reasons. There has to be synergy and a win-win situation for both parties. Timing is also crucial.
- Spend enough effort to ensure that various systems (especially IT and accounting practices) can be successfully integrated.
- Various expectations need to be managed. This includes the expectations of management and staff.
- Be totally transparent. Dishonesty will come back and haunt you.
- He always tries to under-promise and over-deliver. The opposite situation will create tension and sanctions will normally be incurred.
- Ensure that the financial performance of the merged entity remains on par with projected performance.
- Manage risks. This includes business, financial, operational and personnel risks.
- Get the right support and guidance during negotiations. All consulting services must provide assistance in an objective manner. Make sure all contracts are 100% correct and acceptable.
- It is crucial that current business activities are not neglected during the merger and acquisition process.
Copyright © 2008 – Wim Venter
