Mergers and acquisitions is an economic, more precisely financial term that primarily refers to the consolidation of companies or other assets. This process takes place through a series of financial transactions, which includes tender offers, purchase of assets, mergers, activation and management of the same. If we look at this concept by analyzing these two concepts, in particular, we can be confused and on the wrong path. The term “mergers”, as well as the term “acquisitions”, have their meanings, but by combining them into one new and unique concept of m&a, we arrive at something much higher.
The essence of m&a activity is the combination of two or more companies to form one. In this new formation, the synergy of the companies comes to the fore, which is best described by the formula: 1+1=3. this means that their merger brings not only individual advantages but also creates a new environment that is above themselves. the merger process mainly takes place when a company buys another company by buying its shares or part of its shares. This purchase takes place in exchange for its shares. The acquisition process represents a somewhat different flow in which the management does not change for the most part. Here, shareholders can vote on whether or not to complete the merger.
Mergers and acquisitions provide an alternative to organic growth while reducing risks. This unique combination of companies is not at all a simple process, before companies embark on this story, a lot of research, data and knowledge are needed. Therefore, in this ultimate guide, we offer you 3 things you need to know about mergers & acquisitions.
1. Valuation and Negotiable
In this process, as in any financial transaction, it is very important to carefully assess whether to invest or whether the buyer has offered a decent price. The good thing to know about an M&A transaction is the fact that you have room for negotiation. However, when it comes to company shares, the buying/selling of shares is not done publicly, so if you are new to this process, the price may be unclear to you. It does not represent a free estimate, but depends on several factors such as: the movement of shares on the market; your company’s growth relative to the competition; your company’s last financial quarter balance; trends and forecasts for your company’s growth; the technology used in your company, whether you are a candidate for an IPO, etc. To be sure of the M&A statistical assessment, we suggest you contact the Institute, the leading academic institution for M&A. Find them at https://imaa-institute.org/mergers-and-acquisitions-statistics/.
It is often the case that an agreement cannot be reached regarding the price. In that case, it is best to estimate the earnout. It implies a contractually defined provision that enables additional earnings for the seller. In this sense, negotiations are something that cannot be done without, so do not hesitate and do not run away from additional questions and sub-questions when it comes to the price. You may be surprised by what you have achieved, but if you don’t try, you won’t know.
2. Arm yourself with patience
If you thought that decision-making, assessment and conclusion of work can be done in one day, you are very mistaken. This is a process that takes quite a long time because the stake is not insignificant. The period required for an M&A transaction to be officially completed can take anywhere from 4 to 6 months. Of course, this deadline is not fixed by anything but depends on the urgency of the buyer, the number of bidders, etc.
Your financial advisor can assist you in shortening the deadlines for closing the M&A process. Defining and shortening deadlines can best be implemented through auction sales where all bidders have a single deadline. Of course, what the seller can still do to somewhat shorten the deadlines is to organize well in the very preparatory phase of this process. Here it is necessary to prepare all the necessary documentation, including presentations, financial reports, patents and the like. here are also defined the deadlines when the information will be released to the public so that the deadline for closing the entire process can be predicted.
3. Customer statistics
No matter how attractive and reputable the company the buyer is interested in is, they certainly won’t buy it based on reputation alone. The customer wants accurate, precise and simply displayed data, based on which he will know exactly what he is buying. More precisely, it will be much clearer to him how much responsibility he is taking on, what he is committing to, what he can expect in a certain period, as well as the risks he will take on himself. Private companies, especially due to the lack of public control, are a special risky category. Therefore, this information is of crucial importance. A detailed investigation by several different teams is necessary here.
Fortunately, with the development of technique and technology, various programs have appeared for processing and displaying this data. M&A data must be open to the potential buyer as well as the entire M&A statistics. However, this confidential data should be found in a special, protected place on the network, and therefore physical contact between the buyer and the seller is not necessary.
Selecting and placing all the necessary information online is quite a complicated job and requires a lot of time and precision. However, the success of the entire M&A process depends on how much your company will dedicate itself to this process. Incomplete lists look unprofessional, so do this work in its entirety before releasing the information to the Internet. If you are skeptical about sharing such confidential information on the Internet, know that accessing the data room is not easy. It will ask for your login details and password, and if you’re still skeptical, consult your IT team about additional login details. Once again, we remind you that you can always find help at the M&A Institute.
What is very important to remember in this whole process is that it is not you and that these are not your personal decisions, but the welfare of the company and business comes first. If you notice that the gap between supply and demand is too big, it is not a bad idea to think about getting out of this business. Therefore, the most important thing is to prepare well and consider all possible options.