Among all the transactions a business may undertake, mergers and acquisitions are among the largest. Acquiring another company or merging with a separate entity can drastically expand a company’s reach and operations.
Although owners and executives typically conduct such transactions in the hope of building and strengthening the business, failed mergers and acquisitions can easily lead to operational issues, or in the worst case, the dissolution of a previously successful company. Therefore, it is of the utmost importance that those preparing for a merger or acquisition approach the process cautiously and with an eye on the company’s long-term viability.
The three tips below are all ways for owners and executives to be more proactive about protecting the organization during a merger or acquisition.
Be thorough about due diligence
Simply accepting the financial documents presented by the other organization at face value can be a massive mistake during a merger or acquisition. A previously successful company could end up saddled with insurmountable debt or facing massive lawsuits brought by workers alleging discrimination or clients who claim that the company did not properly provide contracted services. The company seeking to acquire or merge with another organization will need to carefully investigate the circumstances of the second company to rule out any financial misrepresentation or risk of future liability.
Seek to maximize employee retention
Workers naturally worry about job stability when there are major changes to their employer. Almost everyone has heard a story about massive downsizing following a merger or acquisition that results in a glut of talent on the employment market and a dearth of available positions.
Organizations can lose a significant number of top employees during company changes, according to Gallup Research, which would include merger or acquisition, but this is preventable with advanced planning. Human resources or management teams can identify top performers throughout the organization and negotiate retention bonuses or new contracts that will help keep as many employees as possible.
Create a plan for integrating operations
Planning proactively is of the utmost importance when preparing for mergers, acquisitions or other major business transactions. The more thorough the plan is for resolving business redundancies and combining company cultures, the less stressful the transition process will be for both companies. From having a plan in place about what facilities and machinery the company will retain to planned retreats that allow for the more functional integration of teams, there are ways to stave off the disruption that occurs during the transition process after a merger or acquisition.
Owners and executives who understand the potential pitfalls of large business transactions will be in a better position to reduce those risks within the organization.
Notice: We are providing this as general information only, and it should not be considered legal advice, which depends on the facts of each specific situation. Receipt of this content does not establish an attorney-client relationship.