Merging with another business can be advantageous for all involved. Of course, there are different types of mergers, and they’ll be discussed below. But whichever type of merger your business is going to be involved in, preparation is key. This is not the kind of process that you can rush into head first without thinking very carefully beforehand. If you do that, all kinds of problems can emerge, and some of them could cause serious chaos.
Being aware of the steps you need to take before your company begins the merger process is the first stage. If you don’t know what you need to do, then you can’t move through the process in the smooth and swift way you will want to. Many business owners underestimate the work involved in merging two businesses. That’s a big mistake because this is a detailed and intricate process. It will only be successful if everything is in order ahead of the beginning of that process.
Clarify the Type of Merger
One of the most common types of business mergers is horizontal mergers. This is when both of the businesses are in the same sector, and they are usually roughly the same size. This is a straightforward and easy to complete kind of merger. Vertical mergers occur when two businesses that make two complementary products come together. When you are clarifying which kind of merger you need to undertake, you’ll have to take into account a number of things. But it’s most important to think about what the two businesses do, as well as what the similarities and differences are. If you do that, it should be simple to pick the right kind.
Check the Business’s Financial Health
The business needs to be in good health in financial terms before the merger begins. Some businesses allow an independent audit to take place. The results of this audit can then be shared with the other people involved in the merger. If both businesses are audited, all that important financial information will be clear for everyone to see. When both sides are happy with the financial health of the other business, things can start to move forward more smoothly. So, always make sure the business is strong financial health before taking on the merger.
Assemble a Team to Oversee the Process
A merger is not something that you will be able to take on by yourself. No matter how much you think that you will be able to do that, you probably won’t. It’s a detailed and complex kind of process, and it will take a team of people to get the job done properly. So, it’s up to you to assemble that team. You should aim to bring together a group of people that have varied skills, experiences and abilities. You also need to make sure that you can trust everyone who’s in the team. This is a very important and pressured job, so you need to be able to rely on each and every person involved.
Keep Employees Informed
Your employees can often be impacted when your business is undertaking a merger. It’s not uncommon for job losses to take place when the process gets underway. This is something that your employees will be aware of, and it’s what they will be worried about. This can then have a negative impact on the way they carry out their jobs. To stop this from becoming an issue for you, you should keep employees informed throughout the whole process. If they are told what is happening, they will feel more relaxed about the whole process. And if jobs are at risk, be clear about this at the earliest opportunity.
Sort Out All the Relevant Documents
There are so many papers and documents that will be needed when the merger is underway. This is something that you are going to have to be prepared for. From ownership documents to financial information, nothing can be left out. It’s vital that everything is open and clear. Nothing should be left off the table because both businesses involved in the merger need to trust one another. If they can’t do that, then it will simply get messy, and the merger might even break down before completion is achieved. Things like virtual data rooms can help you out when you’re trying to collect all these important documents in one place ahead of the merger.
Set Some Aims
Every business wants to achieve something in particular when they go ahead with a merger. It’s a huge undertaking, and no business does it without knowing why. Do you want to expand your market share? Do you want to take advantage of greater resources and reach? These are the things that you need to give some thought to in the run-up to the merger. If you don’t have a solid set of aims in place, how will you ever be able to measure the success or failure of the merger? This is something that you will definitely want to do in the future. Don’t be afraid of making these aims very specific because that will make your life easier later on.
Fix Your Negotiation Position
You need to get together with the team of people who will oversee the process and prepare for the negotiations. These negotiations will be one of the most important stages of the entire process. You need to know what your position in the negotiations will be before they get underway. Everyone in your team has to be on the same page and know all the ins and outs of the company’s position. This is what’s most important when you are setting your negotiating position. So, don’t go into the negotiations until this has been done properly.
Discuss Potential Compromises
Two businesses coming together to create one is clearly going to take a lot of negotiating, as I mentioned above. And even if you have decided on your negotiating position, it will probably have to change. It’s something that you will have to prepare for before you actually enter the negotiations. Both companies will come into the negotiations with a set of limits and issues that they think are important. There will doubtless be some points of disagreement when discussions begin. This is completely normal. But you should discuss some of the issues that you will be prepared to compromise on with your colleagues. It will make the negotiations process much smoother.
Be Prepared for a Lengthy Process
You should always keep the fact that this process will be lengthy in mind. If you are expecting the process to be over within a few days or a week, then you are going to be in for a surprise. It can take a long time for all the relevant details to be addressed by both businesses that are to be merged. Different mergers take different amounts of time. There is a lot of variation in terms of the time it takes because each case is different. But some complex mergers involving big companies can take two or three years. Even smaller and simpler ones can take six months. During that time, you have to keep your business running as usual too.
Once you have addressed each of the eight things above, you should be ready to start the process. Take your time and don’t cut corners. When you do that, mistakes get made, and that can have long-term consequence. Slow and steady is always best when you’re taking on a business merger.
