The decision to merge or sell to another company is not one to be taken lightly. While the intent is to gain maximum benefit from the entire process, there are some mistakes that we see in unsuccessful mergers and acquisitions. Avoiding these common pitfalls should pave the way for all parties to walk away from the transaction satisfied. Let’s take a look at some of the most common ones.
Rushing Into Legal Counsel
Not all lawyers are created equally. Each attorney is trained and experienced in different sectors of the law. It is important to not only find a corporate attorney, but to find one that specializes in mergers and acquisitions. There are many distinct nuances when it comes to this part of the law, and you need an attorney that is familiar with them.
Underestimating the Time Frame
As mentioned, this is not an easy process. Many people are involved and the buyers want to be sure that their purchase is a sound one. It is not uncommon for the entire process to take up to 12 months. Avoid frustration and keep a realistic timeframe in mind.
Failing to Conduct a Diligent Internal Audit
The buyer will be going through all the ins and outs of the business, and they will almost certainly bring up any issues that are found. By staying aware of the internal issues that may arise during negotiation, you’ll stay ahead of the game. Staying diligent in reviewing your internal processes gives the ability to troubleshoot and address any snags before the buyer brings them to your attention.
Failing to institute an NDA is another major mistake. Many times, companies are merging or acquiring with their competitors. Having an NDA will prevent potential leakage of information and the use of proprietary information by your competition. Additionally, the NDA can set the terms and boundaries of the negotiation.
Announcing the Merger Too Early
There may be the urge to inform staff and clients about the negotiations. However, it is more beneficial to wait until further along in the agreement. Staff may be worried about the new work environment and start searching for new employment. Additionally, clients and customers may now think they will not be receiving the same product or service that was previously delivered.
Showing Your Hand
As the seller, you may be aware that you only have one potential buyer. However, it is best not to make the buyer aware. Rather, it can be beneficial for the buyer to believe that they are competing for the business. This not only adds value in buyers’ eyes but it can also drive up the purchase price. Many companies have a bidding process where buyers must submit bids discreetly. This keeps the buyer unaware of how many potential competitors they are bidding against.
For more information on how to avoid these common sell-side M&A mistakes, or to schedule a consultation with one of our experts, contact Ashley Capital Group today.