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Those who have been serving clients with strategic advices on mergers and acquisitions must have felt it many a times that a number of deals had gone wrong for reasons that could be avoided if due care had been taken on part of the client at the initial stage. It is quite astonishing that most organizations need to opt for mergers and acquisitions for insignificant mistakes that resulted in significant outcomes putting the organization in existential challenge. These are common mistakes or shortcomings that can be overcome very easily. However, not taking care of these apparently insignificant factors will cause loss that would take a lot to recover. Let me now share with you these factors so that you, like smart learners, can learn from the mistakes of the others and not by experiencing loss. Taking care of these issues will also help you in capital raising for your organization.
Check If Your Calculation Makes Three out of One plus One
When you acquire a particular company, your calculations must produce three out of one plus one. Or else you will not be benefitted by mergers and acquisitions, resulting in a poor or negative capital raising for your company. You should not calculate the profit of the combined company based on assumptions. You really have to calculate on the basis of the analysis of strengths, weaknesses, opportunities and possible threats of both the organizations.
Doing SWOT analysis of your organization is not a big deal. You know your company better than anyone else. However, you need to know the other party thoroughly. You might think it is a very basic necessity to know the other company. The surprise is that most acquirers do not analyze the true potential of the company they are going to acquire, while using sources like Google, Factiva, Capital IQ, Dun & Bradstreet provide adequate data about a company. Since the organizations do not analyze these factors, they fail to calculate and find if one plus one makes three when it goes for mergers and acquisitions.
Don’t Get Emotional
As the CEO or the owner of the company you may feel terribly enthusiastic about mergers and acquisitions. It is not only because of the prospect of capital raising, but for you have strong emotional attachment with the company or the organization. When you, as the owner of the CEO become too emotional over it, your key management professionals may not stress much on the risk factors. As a result, you miss the reasons that might have made you decide not to go forward.
Put Yourself in the Seller’s Shoes
In case of mergers and acquisitions, the opinions and demands of both the parties are equally important. While you look forward to offering the lowest possible price as described in the purchase order finance document, the other party me looking for the best price being offered. In such cases compromise is the art that combine the two parties. But evidently, both are equally unhappy partners. And you must agree that unhappy partners can do the job but can hardly excel.
I would not suggest you to offer higher prices for a company that you are going to acquire. However, you can at least put yourself in the seller’s shoes. This will make you understand why they are selling. And understanding the reason will give an idea about the possible turnover or capital raising that you can expect from the newly emerged company.
Jacob Willis is a freelance financial advisor who discusses the common mistakes most companies commit while they go for mergers and acquisitions for capital raising. He has unique tips on how to make the best out of a merger and acquisition.
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