The pressure to earn returns can make M&A needlessly difficult, pushing deals through the finance department with inadequate due diligence. Sometimes companies simply fail to ask the right questions. The following six steps can help CFOs make sage decisions and avoid the most common M&A missteps.
Have a Real Strategy
Hope and good intentions don’t count. Slow down and ask tough questions. If you don’t know what your strategy is, then how do you know if something is a good acquisition? Do the objectives of the deal make sense? Does it align with your vision? How will shareholders and customers feel? Don’t just hope things will work out. Know the answer to these and other strategic queries.
Ask What You’re Buying
This seems obvious, but in the rush to M&A, many buyers get distracted. Understand why the shareholders are selling, as this can offer clear insight into the deal’s risks and benefits. Ask for the last quarterly earnings report. Review what people are saying online. Sometimes problems show up on blogs first, not in the numbers.
Due diligence checklists can be thousands of pages long, but only a few key questions really matter. Identify the most important questions to this deal, then insist on an answer before moving forward.
Align Your Cultures
This is subjective and often amorphous, but still warrants consideration. Deals often fail when the companies’ cultures align poorly. Leadership talks over one another, or staff feel bullied. If it doesn’t feel quite right, don’t ignore that feeling. The CFO should have a clear view of what the ideal target culture is. In the best deals, the teams work well together from the beginning, and are finishing one another’s sentences by the end.
Have a Plan for the Big Reveal
What’s the plan before the announcement, between closing and the announcement, and for integration. Know which role each person will play. Remember that a key to a successful merger is ensuring that shareholders understand why the acquisition is a good one.
Who will communicate with the seller between announcement and close? Remember that there are things you can and can’t do during that period. It’s important to stay connected, to sustain energy, and to stick to the integration plan. An important key here is making sure that budgets are aligned. Make sure you have clear agreements about how much time, money, and effort you are going to invest into making the final leg of the deal successful.
Focus on Leadership
Form a relationship with the target business’s leadership. A takeover can be a radically different experience for management. They were running an independent operation just a few hours ago. They need to hear why they should go to work for the buyer. Is there money to be made? What’s in it for them?
Listen to Your Intuition
If you feel like somethings just not right, don’t ignore that nagging voice in the back of your mind. Get more involved. Ask more questions. Advocate for what feels right. Sometimes your intuition detects a problem before your conscious mind does. So if you feel uncertain, ask why and keep doing so until you have an answer you can live with.
Five Talents Financial Group
There comes a time when business owners should decide how they will handle the exit of their business. Prudent entrepreneurs do not leave this critical juncture to chance, they plan for it thoroughly and well before such an event should occur. Successfully navigating the sale or transfer of your business requires a dedicated and capable team. The members of Five Talents collectively possess nearly a century of business experience combined with specific industry training and certification. The skills and know how, combined with a deep commitment to the best possible outcomes for our clientele, enable us to provide you with advisory services you can feel secure with.
Give us a call to have a confidential discussion about what may be right for you and your family.