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Merger and Acquisition Consultant Minnesota

Merger & Acquisition: a 5-Step Checklist for Your Business

If your company is involved in a merger in Minnesota, no matter the side it is on (buying or being bought), it can be difficult to keep track of everything that needs to happen from start to finish of the negotiations.

A merger and acquisitions agreement involves a lot of paperwork, contracts and legal technicalities. Much of the M&A process revolves around knowing the other company’s culture.

The idea behind a merger or acquisition is to make the two companies greater than the sum of their parts; for example, the shareholder value should be higher than the two companies combined. Strategizing a merger or acquisition is nothing new, and companies use these tactics across the world.  By the end of 2015, the value of global mergers and acquisitions deals reached $4.28 trillion, and the US deals amounted to $1.97 trillion. While the two words are used simultaneously a lot, they do not mean the same thing.  A merger is when two firms, usually of about the same size, agree to continue as a single new company.  An acquisition is when one company takes over another and establishes itself as the new owner. The reason the two words are used together is because many times there is a middle ground in which both could apply.

When Should a Small Business Consider a Merger?

A company, no matter the type, will usually go through a defined evolution throughout its existence: startup, growth, maturity, decline, and then a rebirth or death. Depending on the stage which your company may be in, a merger or acquisition could be an opportunity or a necessity. Some scenarios where it may be prudent to consider an M&A involve:

  • Increasing market share.
  • The profit potential is higher when acquiring outside firms as opposed to investing in existing businesses.
  • Partnering with other businesses can ensure survival.
  • Restructuring equity and debt to make loans cost less, which will attract new shareholders.

As with anything, there are potential challenges to setting up an M&A agreement. Negotiating a deal may be complicated, and it will help to avoid an impasse by having a smart advisory firm review all terms of the deal.

Merger & Acquisition Checklist 

An M&A can take months or even years to complete from start to finish, and the amount of things of which you’d need to keep track is essentially the business version of a pre-flight checklist for a commercial airliner. Some of the more important matters for the buyer to look for during the diligence process include:

  1. Beware of attempts to withhold information; even if innocuous it could be an indication of how they conduct business in general.
  2. As the buyer, interests and company culture of the other company should be similar.
  3. Compliance with government laws should be near the top of the list; if the company has received any notices from government agencies or isn’t complying with environmental regulations.
  4. Financial statements of all kinds should be thoroughly organized; warrant agreements, stock agreements, obligations, tax records, purchases and sales, and anything else related to the venture.
  5. What are the business and personal relationships with customers like? Note the revenues generated, risks, backlog and sales terms in place to get an idea of how daily business is conducted. More important than anything is the satisfaction of the customer.

We have TRUSTED Resources for Your Merger or Acquisition.

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Julie Keyes
Julie Keyes

Founder & Owner at KeyeStrategies, LLC

Julie is a Certified Exit Planning Adviser and Value Growth Advisor with 30+ years of experience. She works with business owners who seek to understand and maximize their exit and critical transition options.