Monday 16 October 2017

Top 7 Tips To Make Mergers And Acquisitions Successful


Although mergers and acquisitions (M & A) are becoming increasingly frequent, it's a vivid reality that most of the M & A transactions fail in the long run due to a number of reasons. Companies and financial firms agree to mergers and acquisitions to increase the growth rate up to a great extent, cut the company/business operational cost, increase ROI, and capture the market share. Do you run a company? Planning to go for mergers and acquisitions in coming days? If yes, then have a look at some key factors that will help you to make the M & A transaction successful easily:

1. Deal With Stable Companies/Firms

When you go for mergers and acquisitions, first of all, you should analyze the financial well being of the company/firm you want to acquire or merge. As M & A transactions demand cash injections to take place, just take the help of chartered accountants, expert auditors, financial experts, and conduct a thorough research to find out the previous transactions of the target company. This will let you know whether you should invest in that company or not considering its potential for future growth. You can adopt the policy of wait and watch to find good companies to acquire or merge your company with.

2. Arrange Of Sufficient Funds Or Low-Interest Loans

Most of the mergers and acquisitions are financed through unsecured debts which carry a huge rate of interest with them. These high-interest loans put the financial burden on the parent company in the long run if it fails to perform as expected. In case of a complete fiasco, the stock prices of the parent company fall sharply, making it difficult for the company to pay back the loan on the scheduled date.

In many cases, two or more companies bid for the same company which increases the cost of the mergers and acquisitions. Therefore, you should have enough budget to complete the M&A transaction and a well-designed plan to recover the invested money. In case, you don't have sufficient funds, try to seek low-interest loans from banks. You can easily pay off low-interest loans with applicable interest in time and continue your business as usual.


3. Choose The Employees You Need

Mergers and Acquisitions result in the job loss of several employees of the involved companies because the newly formed company wants to cut the operational cost as far as possible and save money. So, you must have a list of employees from both companies and choose those individuals you would like to continue with the newly formed company. Always keep in mind fired employees can take legal action against you if their interests are not protected. So, be careful here and treat them fairly.

4. Make Business Agreements In Writing

When you agree to an M&A transaction, you should make all business agreements in writing as per the applicable law. If you don't know the rules and regulations related to the Mergers and Acquisitions, it would be better for you to seek the legal consultation provided by mergers & acquisitions lawyers. A written agreement prevents the stakeholders, business partners, investors, employees from changing their stand later on and helps your company a lot in terms of the availability of resources for the expansion of the business.

5. A Uniform Work Culture

Always keep in mind that two companies finish the same work in different ways and there is a huge difference between their work cultures. So, when you complete the M&A transaction, inform your employees and all stakeholders about the work culture of your company. This will eliminate confusion among your employees and they will come up with their best for the development of the company.


6. Get Ready For Litigation

On several occasions, it has been seen that parent companies neglect the interest of the employees and the shareholders. Employees from the acquired companies started to feel hostile towards the parent company. They shift their attention from productive work to issues related to conflicts, layoff, compensation, etc. Fired employees and ignored stakeholders can start the litigation against the company to claim their genuine rights and benefits. If there are too many cases against your company, it can affect the business opportunities and future growth. To stop these types of unpleasant situations from taking place, a proper communication should be maintained between the management and the employees. You should also hire an expert lawyer to deal with false cases against your company and get them revoked by the courts.


7. Set Goals For Future Development

Mergers and acquisitions come at a big price. So, companies like to recover the invested amount as soon as possible and start making benefits thereafter. For this, they must have a plan for future development of the company. They should work sincerely to achieve the set goals by hook or by crook.

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