You might have spent years building up a business and are now looking to take what you’ve built in another direction. Perhaps you’ve spotted something in another business whose work or products complement yours and bringing them on board would represent a big step forward for you. Or maybe you’re an experienced senior leader, and the chance has arisen for you to directly or partly own the business for which you work.
Whatever the scenario, buying or combining businesses can be a great move, allowing retiring owners to step down; new senior leadership to protect a business well into the future, or joining two or more teams to create something bigger and better than what they’ve been able to do on their own.
The world is full of great examples of companies where retiring owners have passed their work into safe hands with new teams; or businesses which have seen the benefits of working with potential rivals and bringing them into their groups, with new leaders and structures.
One of the businesses we’ve been able to support with acquisitions is the Ethikos Group, a Flintshire-based manufacturer whom we supported in the spring of 2022 to buy Print-Tech Solutions.
What are mergers and acquisitions?
Mergers and acquisitions – sometimes known as M&A – can be big news, with high-profile cases often involving multi-billion dollar deals and complex handover arrangements with legions of legal experts.
But mergers and acquisitions aren’t just for big companies or corporations. Any well-established business which is looking to take its next step can consider them, and they’re important options when thinking about your business succession planning.
If you’re a business looking to buy another, or if you’re considering a prospective sale to a potential partner business, it’s important you consider some key points.
1 – Is this really what you need?
While taking advantage of a good opportunity is a no-brainer, you need to be sure that the opportunity you’ve spotted really is right for you.
Does it match your business strategy? If you were set on scaling up growth and have been building up towards such a move, the benefits of a merger or acquisition can seem obvious. But if it’s an unexpected step, not in line with your current business plans, it might cause problems further down the line.
Does your target business really match your values? Your goals? What about the products or services they offer? Do they strengthen your existing offer? Do they give you access to a wider customer base? What size are they? Do they have the same working culture?
If you’ve got positive answers to all of the above – great! Taking that step might really be the right one for you. If you’re not sure, that’s okay – but make sure you take time to get the information you need, to the point you’re truly satisfied with moving to the next phase.
2 – Do your due diligence
As with everything in business planning, there really is no substitute for doing your homework. While due diligence can be part of a complicated process, the returns you get from it can offer valuable insights into how you should progress.
There are legal and financial considerations to be made. You need to look at the strengths and weaknesses of your target business. Or, if you’re being looked at by a prospective buyer, you need to know more about them.
What do they offer? Do they bring along a dedicated, experienced and knowledgeable team? Have they got cutting-edge machinery or proprietary software which would pair up brilliantly with your operations? Have they had healthy returns over the last few years? Have they had any run-ins with regulators?
3 – What are the costs?
The cost of a merger or acquisition doesn’t just involve the buying or selling price of an individual business. The process itself brings other legal and advisory costs, so make sure you’re going in with the full knowledge of what the ultimate cost will be.
The valuation will partly rely on some of the work you’ve already done around the business’ place in the market. But even then, that will only give you a cost – you also need to figure out how that cost is going to be paid. Can the buyer offer a one-off payment? Or maybe there’s move for longer-term payment plans? And what will it mean once the business is well and truly bought and sold?
4 – Bring everyone together
Once the sale, acquisition or merger has gone ahead, you should be congratulated on having navigated the process.
But it’s not the end of your work – far from it.
Now, you’ve got to work hard to bring together all of your new teams under one single structure, if not one roof.
Will you have employees in one team who will move to leadership roles in another? Do you know what your new structure looks like, outlining who is responsible for what under the new business? Do you know what your new brand will look like – will you keep them separate, or create a new, unified brand which shows off what you’re doing together? Even things as day-to-day as ICT systems and HR practices might all have to change, and you need to make sure you don’t have systems that clash or needlessly duplicate work.
As with everything, planning and strategy is key. Mergers and acquisitions are a big step for a business, and offer a lot of exciting new routes to growth – but they can also pose difficulties for businesses that don’t figure out how to join their existing propositions, or don’t know how to pitch their new offering to customers.
Doing your work ahead of time, and making sure you’ve done your research so you know that it’s the right decision for you, is worth it. For more information on the sort of support we can offer with buyouts or similar deals, visit our page on buying businesses.
