08 / 26 / 2016

M&A: What to Consider When Merging

mergers_and_acquisitions.jpgAlthough a company that merges with or acquires another company is a very unique process, subject to the respective objectives, company cultures and industry atmosphere, the bottom-line goal is for Company A and Company B to join forces or for Company A to acquire the assets, interest, etc. of Company B.

Ideally, Company A that merges with Company B creates a company that is synergistically stronger than potential competitors (in other words, the synergy allows 2+2 = 5, 8 or even 20). However, mergers and acquisitions are not easy tasks for companies. There are shareholders to please, market conditions and opportunities to wait for, and a plethora of legal obstacles to navigate along the way.

Considerations

Because mergers become attractive for young companies and other start-ups who believe an M&A will bolster their standing in their industry, consider two of the most popular aspects when considering a merger and/or acquisition. It will sound a lot like marriage advice, but when one thinks about it, companies are made up of human beings after all.

  1. Communicate Intentions and Expectations: I read a story about a CEO who brought together a team of over 100 specialists to assist in the companies’ merger. This team comprised of bankers, consultants, attorneys and accountants along with his company’s staff. With so many people, groups, other companies, and independent contracts, one could reasonably expect negotiations were not walks in the park. It is very unlikely that two small start-ups would require such a line-up in order to carry out a merger or acquisition, but the crux of the matter is still the same: such an event between two companies is as complex as it is important. Clearly defined contracts that outline as many intentions of both parties as possible goes a very long way for both sides. Should something go awry, the two parties who have merged can go back to the contract for guidance. This is what a court will do anyway, so it’s prudent to save the court’s time, spell it out up front and look through the contract first should a dispute arise.
  1. Address the Different Company Cultures (Especially the Small Stuff): What if Company A has a very relaxed dress code while Company B believes business professional is required? How do the companies treat a 40-hour work week: strictly 40 hours or “so long as you get your work done”? Is upper management easily accessible to the employees? These things are ostensibly insignificant, but could tremendously affect work morale in the newly merged company, cutting into product/service output and leading to a loss of potential revenue. Outlining something like a dress code sounds silly and may not need to be specifically included in a contract, but it should not be forgotten about when negotiating with each other.  Remember, these are human beings. Acquiring the trade secrets of a certain program for app development is always lucrative, but people will always care about whether there are sugar packets in the office-kitchen for their morning coffee.
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