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How to Handle a Merger and Acquisition the Right Way
How to Handle a Merger and Acquisition the Right Way
Strategic growth keeps businesses alive. Sometimes, your strategy requires something dramatic, like merging your business with another entity . But mergers and acquisitions can get ugly if done incorrectly. Fortunately, there are simple steps you can take to avoid catastrophe.
3 Steps to a Merger and Acquisition Process
When looking at any merger and acquisition transaction, there are three phases to consider: Before, during, and after the transaction. Within each phase are multiple steps you should take to ensure you go about the process correctly.
1. Before the Transaction
The company prepares for the acquisition or merger. They do this by:
- Organizing and tidying up current financial information
- Evaluating their company and potential sale price
- Preparing slide decks for future presentations
- Networking with potential buyers
Essentially, you want your company to be as presentable and financially sound as possible before attempting to merge or sell. Doing so will help position your company for future financial success in your acquisition ventures. This can also increase your chances of a buyer becoming interested in your company. The preparation stage for a transaction can start 1- 3 years before you expect to sell or merge. The sooner you start preparing for a transaction the smoother the process will be during the transaction.
2. During the Transaction
Once you find a suitable buyer, you can begin the transaction process. This should involve a quality of earnings (QofE) report, which analyzes your company’s earnings before interest, taxes, depreciation, and amortization (EBITDA). This ensures both you and the purchasing entity are working with the best information possible.
3. After the Transaction
The merging process isn’t over just because the transaction is over. You should reevaluate your assets and liabilities on your balance sheet after the transaction is complete. This phase may also involve looking at how your organization will integrate into the new business entity.
Throughout each of these three phases, your CFO is the experienced ally you need to complete your necessary financial reporting. They will ensure you are bought out by a company that has your best interests in mind.
A CFO can also help you comply with SEC and other regulations about what you can say before announcing a merger, who you can say it to, and when you can say it, including rules about trading on inside information.
5 Tips to Prepare for a Merger and Acquisition
If you want to make it through the three phases of an M&A transaction relatively quickly and unscathed, you’ll need the counsel of a CFO. Here are five tips for completing your M&A and how a CFO can help you with each of these strategies.
1. Value Your Business
Your sale price isn’t something you should take lightly—you’re worth every penny. But how do you accurately evaluate your company? Some variables worth considering include:
- Total revenue
- Valuable assets
- Current market conditions
These variables just scratch the surface of valuation. A CFO can help you identify the most important variables for your company to assess your current value.
2. Network with Buyers
Finding a buyer is sometimes the most difficult part of the M&A process. How can you find an entrepreneur that is both experienced in your industry and has the capital to purchase your business?
CFOs have connections. They will open the door to potential buyers and help you start conversations that get the M&A process moving. This can include helping you put together pitch decks for specific buyers to maximize your chances of striking a deal. CFOs can also help you narrow the buyers to a few viable candidates (which brings us to our next point).
3. Screen Your Potential Buyers
After introducing you to a variety of potential buyers, a CFO will work with you to ensure your buyer has your best interest in mind. You’ll likely run into two different buyers in your journey: Financial buyers and strategic buyers.
Financial buyers are simply those who are primarily interested in making money from purchasing your company. As such, they may not be as interested in keeping your employees or using any of the infrastructures you’ve developed over the years.
Strategic buyers are looking to utilize your organization’s assets, whether it’s your technology, your employees, your vendors, or any of your business’ assets. This is the buyer you should be interested in—one that can leverage your existing successes into something greater.
4. Keep Employees Informed
Your employees are undoubtedly concerned about how a potential merger or acquisition will affect their well-being. After all, roughly 30% of employees are made redundant after a merger or acquisition within the same industry.
The best course of action is simply being transparent with your employees about their future with the company moving forward. It’s not always easy to predict which roles are on the chopping block, but a CFO can help you at least predict which roles are more likely to be made redundant.
5. Communicate with Customers
Finally, you want to be very clear with your customers about the future of your business. Your CFO will help you identify the correct time to notify your customers of an impending M&A. They can also help you answer your customers’ questions and concerns regarding the M&A, helping you prepare talking points to address when having these difficult discussions.
Lessons Learned from M&A Transactions
Ampleo has extensive experience with M&A transactions, particularly in helping our clients clean up their financials to be prepared for the process. Recently, we helped Biotron Laboratories create a QofE report at the request of the G2 Capital Advisors.
With our help, Biotron managed to merge its financials with Talus Mineral Company and become GAAP compliant. Thanks to Ampleo, Biotron had more confidence through the transaction because they knew their numbers were accurate. And when you’re going through a process as complicated as M&A, peace of mind is virtually priceless.
Your Path to Better M&A Preparation
Don’t try and tackle your mergers and acquisitions alone. Working with a professional CFO can alleviate the burdens of M&A transactions so you can focus on what matters most: making a deal that benefits you, your employees, and your shareholders.
For help with your mergers and acquisitions, contact Ampleo today .
Patrick McMillan is a CFO and Transaction Advisor at Amplēo with a deep specialization in Quality of Earnings (QofE) and Financial Due Diligence (FDD), helping companies before, during, and after transactions.
Before becoming a consultant at Amplēo in 2020, Patrick brought a wealth of experience from his role as Corporate Controller and acting CFO for a franchise group, where he led a significant expansion from 38 to 63 locations. He then served as an independent consultant and strategic advisor for various small, high-growth companies, enabling them to scale effectively and sustainably.
Despite his extensive financial expertise, Patrick is anything but your typical accountant and finance strategist. His passion for numbers rivals others’ love for chocolate or coffee, as evidenced by his favorite shirt proclaiming, “Warning: may talk about EBITDA.”
Known for his infectious smile and joyful character, Patrick has a talent for guiding teams and companies through exponential growth. Throughout his career, he’s served predominantly in C-suite roles, steering numerous entities to triple-digit growth year after year. Patrick’s meticulous approach to financial due diligence has been instrumental in facilitating numerous M&A transactions totaling over $2 billion in combined valuation.
Patrick has been featured on multiple podcasts and speaking events, including The Thinking Project, Acquicon, Business Ninjas, M&A Masters, ExitGuide, Let’s Buy a Business, Bill, Financial Modeler’s Corner, and Utah Business Forward.
Fun Facts/Hobbies
- Mountain biking
- Hiking
- Camping
- Running
- Reading biographies
Education/Certificates
- Bachelor’s degree in Spanish and Business from East Tennessee State University
- MBA (finance) from Utah Valley University
- Certified Exit Planning Advisor
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