An acquisition in a business has to be the perfect consolidation of two companies in order to turn into something cohesive. With so many different parts that need to perfectly match, a business really has to look at how well that combination will work before the acquisition contract is signed. Being on the same page about business ideas and philosophy isn’t always enough.
Determining Financial Security of the Acquired Company
Before any business buys another business, there has to be a thorough investigation into how profitable that other company has been. Have they made considerable profits over the last few years? Do they have liabilities that could potentially create financial or legal hurdles once acquired? Ultimately, a company with some debts could probably be purchased at a much cheaper price. But it isn’t worth the risk when you want an acquisition to mean growth and not stagnation before your first year.
Assembling a Team That Works Well Together
This works in two different ways. The first is in gauging how the team from the acquired business consolidates with the team from the business doing the acquisition. While that might not be fully known until the merge is fully implemented, holding meetings to test chemistry and share ideas can give an estimate.
While there may not be enough time for the above, it’s important to gather a team that works together in the actual acquisition process. That involves lawyers, financial experts and marketing gurus. The CEO behind the merge should head this team effort to make sure the process works as seamlessly as possible. No acquisition should be done alone without consulting with those who represent every possible business angle.
Working with Employees to Ensure a Less Chaotic Transition
If the above meeting of the two company teams can’t happen immediately, there should be a gathering of employees in each respective company to detail what changes are coming. In some cases, some departments may merge ahead of the final acquisition. This has to be made clear as well as proving how beneficial the acquisition will be for the employees in the future.
The Monetary Details Behind the Acquisition
A company has to see if they can really afford an acquisition before doing anything. Merging with a respected company that’s debt free will definitely cost more, even though the gains will be prospectively well worth it in future years. Inc. pointed out several years ago that more expensive acquisitions are generally easier due to the growing cash flow of corporations. Smaller businesses, conversely, might have a more challenging time acquiring bank financing.
One exception to that can be through seller notes. This can merge two businesses with promises that the merged company will pay the buyer later once the coalesced company finally makes profit.
References:
http://www.cio.com/article/473267/7_Tips_for_Surviving_a_Merger_or_Acquisition
http://bobbyfinance.com/2013/02/25/business-acquisition/