The process of nutting out how to make a merger or acquisition work is called a meeting of the minds. You want the best for your company, the people in it, and its future and that’s what the company you’re considering merging with, or acquiring, also wants.
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These are the M&A milestones:
- Finding each other
- The parties (owners and senior management of both firms), lawyers and financiers, and or a business broker agreeing on a common way forward
- Agreeing on pricing (or pricing mechanism)
- Legal documentation
- Settlement
- The process for a merger or acquisition can begin in three main ways.
- A business broker facilitates, presents the business for sale and takes it out to interested parties
- The acquiring firm will actively seek merger and acquisition targets itself, off market.
- People make it known to industry associations that they are looking to get out.
Jamie Davison, co-founder of multi award winning Carbon group and start up investor, says from then it’s a meeting of the minds.
“What do the stakeholders want to do? Do they really want to merge? Is it more an acquisition and they’re calling it a merge because it helps them to create that story of longevity?”.
He says a business broker can help to manage any roadblocks. With a M&A it’s not just one person selling and one person buying.
There’s two different points of view, and sometimes the price is not the sticking point for a sale, it is little things that parties may disagree on. You need someone with a ‘helicopter view’ to help take it forward.
There is a natural tendency for people to postpone discussing items they consider will be hard to reach an agreement over.
That’s when things can get expensive because you could easily end up discussing those difficult topics via your respective solicitors rather than amongst the parties.
To help with costs, and avoid hefty lawyer bills, work out a Head of Agreement yourselves. This agreement covers what you and the other party intend to do. Although not legally binding, it can help to cover off on the conversation with lawyers down the track.
Here’s some crucial points for you to consider:
- Detail: Focus on every detail of the transaction. The detail is absolutely vital. Consider as much as you can about the business post-merger.
- Expectation: What is the expectation of both parties after the merger?
- Operation: How will the business operate as a merged firm? How will the management structure work?
- Brand: Will the brand be combined? Will the new company create something unique?
- Remuneration: How will you be paid? How will your new partner be paid?
- Job roles: What will the new job roles be? You’ve got people who ran their own businesses but after the merger, different parts of the operation will be covered by different people. What will that look like?
- Location: Has there been post-merger consideration about the possible problems of operating at different locations, or will you combine premises? A discussion sticking point can be as simple as staff parking.
After that it’s the legal work and making plans about how the business will operate as a merged firm, and then settlement.
