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Mergers and acquisitions are the results of globalization processes where companies invest their capital in other companies so they can conquer new markets, reduce costs – and increase efficiency and competitiveness. To successfully go through this process, you need to understand it well, so here are some tips to better understand the M&A process.
How To Explain The Merger And Acquisition Process
The phenomenon of mergers and acquisitions has long been present in the business world. Its influence on the design of the corporate scene is very significant, and its fundamental characteristic is constant and rapid growth. In the developed world, this form of transaction has become a common thing. The impact of globalization, technological innovation, and the abolition of state borders – have enabled businesses and consumers to overcome geographical barriers. That’s why today, through mergers and acquisitions, such companies are becoming competitive in international markets in a short time. In this way, multinational companies locate their resources beyond national borders to conquer new markets, reduce production costs – and increase efficiency and profits. However, to achieve a successful M&A process, you must be familiar with this matter.
Success Is Not Guaranteed, Especially If You Don’t Understand The Procedure
Although many see M&A transactions as a relatively fast and efficient way to expand into new markets – their success is by no means guaranteed. On the contrary, according to various studies, almost half of mergers and acquisitions fail. While we can explain some failures by financial and market factors – a significant number of them are the result of neglecting some other aspects that have an impact on this procedure. So you need to understand them well from the start. Here are some tips on how to better understand the process of merging and acquisition.
1. Understand Your Wishes And Goals
Before you even decide to start the M&A process, you need to be sure of what your corporate goals are. That means a long-term projection of future business operations – as well as the expectations you have of your stakeholders. Then, when you are completely sure of what you want – focus on how to achieve it. If your decision to start the M&A process was made rationally and based on the facts that support it – then start it but with the knowledge and understanding of this entire financial procedure. In that sense, it wouldn’t be bad to put the type of company with which you would like to merge on your goals list. When making this decision, finances are often the key factor – but don’t always rely on it because sometimes a complementary culture can be much more significant for mutual success.
2. Examine Your Financial Capabilities Before Entering The Process
Finances are certainly the most important part of the acquisition and merger process – so you must review all your options before entering the procedure. You can choose to invest or have someone else invest in your company in this process. Of course, if you decide to be the party that will invest capital in the merger with another company, then be clear about what you buy and what you want. According to the Imaa Institute, you can train your staff in some of the specialist financial courses for M&A. You can also hire financial consultants who specialize in this type of process. In any case, it will be of great help in assessing your financial capabilities – but also during the entire M&A process.
3. Communication Is Very Important
Among many factors that affect the success of the process of mergers and acquisitions – communication can be a crucial one. Open and frequent communication with employees and their involvement in activities related to the merger or takeover of the company – is the basis for the successful implementation of such a transaction. Namely, employees are sometimes inclined to resist organizational changes – and that is especially pronounced when merging or taking over a company. Effective and timely communication is a significant tool that can benefit management during the merger or takeover of the company.
4. Keep records throughout the process and rely on legal advice
You must keep strict records of every agreement you make with your partners in this process. Not only because you don’t want to skip some important information – but also because you want to know if your business partners are following the deal. Therefore, it is necessary that for each step in the M&A process, you have proof in writing, that is, on paper. You should also rely on your legal team to facilitate your advice in this process on applicable regulations and laws, accounting, the tax system, and similar items. This will minimize the possibility of errors and reduce business risks.
5. Negotiate, but don’t get into business if you’re not 100% sure of the process
As before any other deal, in the process of merging and acquisition, we have negotiations that precede the whole procedure. The information you will receive during the negotiations is essential for your decision to join or not to enter the whole process. Therefore, it is important to be present at these negotiations with the members of your team to get a clearer idea of what kind of procedure awaits you and whether it all pays off. However, it often happens that these negotiations are not successful. Whether it is a disagreement between the parties on an issue or a lack of legal or business documentation that is necessary. Even if something like this happens – don’t let it discourage you. Anyone serious about this process wants to succeed in the long run, so do not rush. Keep in mind that you are not running a short race but a marathon – and consequently, make your decisions wisely and in consultation with your legal and financial team. Even if you quit the M&A process after negotiations, you will be waiting for your real opportunity.
The Bottom Line
As when doing any business – your business intuition will guide you through the M&A process. However, no matter what, you should be careful and understand the entire procedure – so you can go through it painlessly and successfully. We hope that our tips will be at least a little helpful.