Growth Through Mergers and Acquisitions

When two companies attempt to become one through mergers and acquisitions (M&A), it can take months, even years, to complete the negotiations, due diligence and legal requirements. M&A can also be a very expensive undertaking that pays for itself only if the new business entity performs as projected. Unfortunately, in more cases than not, the performance of the new corporation falls far below projections, causing management to scramble in an effort to slow the losses and turn things around.

With M&A being so risky, one might wonder why so many businesses take on such a risk. The answer is simple, when done right, mergers and acquisitions can be the best and fastest way to grow a business. Yet, when eager business leaders rush into merger agreements without considering the integration of the two organizations, chaos can ensue. This lack of foresight is a key component in the vast failure rate of mergers and acquisitions. Therefore, I recommend the following starting points to limit the risk of failure:

1. Engage an independent team of experienced consultants to guide the process. In its most basic form, this team should include lawyers, accountants, management consultants, and human resource professionals.

2. Carefully plan the integration strategy. Most likely, both organizations have a management team and staff performing many of the same duties. Leaders should work with the independent team of consultants to determine who will stay and who will go; and how the remaining duties be divided. These decisions should be made as soon as possible and remain confidential until the merger is final.

3. Plan to begin leveraging economies of scale to cut costs as soon as the merger is complete.

M&A can be a very profitable business growth strategy. Take it slow and don’t neglect the importance of a good integration strategy.

 What do you think, we want to hear from you?