The Challenge of Merging and/or Acquiring a Business
An opportunity to merge with or acquire a competitor or complementary business is not an everyday occurrence for most businesses. Because of the infrequent occurrence, most businesses do not develop or retain the in-house knowledge needed to identify, negotiate, and complete the transaction. As a result, when the opportunity to acquire or merge happens, businesses retain lawyers, accountants and investment or commercial bankers to help them assemble the transaction.
While this outside expertise is focused on legally structuring and completing the financial transaction (“the deal”), the businesses themselves are often left alone to implement the transaction and derive the expected benefits (i.e., make it a “good deal”). Regardless of the quality of the financial transaction, it only becomes a “good deal” if the implementation is successful. Successful implementations are the result of thoughtful analysis and careful planning, ideally, before the deal is negotiated and a well-managed implementation after the transaction is closed. This is what we do, we help you implement the transaction and make it a “good deal”.
A “deal’s” complete life cycle includes the following stages: Feasibility/Analysis; Selection; Due Diligence; Deal Structure and Negotiation; and Implementation and Realization. To be successful, different skills and experience are needed during each of these life cycle stages. While some financial and transactional experts understand the specifically negotiated financial transaction, they may not understand the underlying business operations; and, therefore, it may be difficult for them to identify barriers, enablers, and opportunities to combining organizations and operations. The same logic that hired the transactional experts initially should also be used to retain experts that understand the business as well as the transaction to ensure it becomes a “good deal”.
The following is a list of our different capabilities that can be mixed and matched to provide the short-term expertise, experience boost and skill-bridge to meet the various challenges and opportunities that occur during these Merger and Acquisition Life Cycle stages.
Feasibility/Analysis
- Needs Identification (Objectives, risks, costs and benefits of using both organic and inorganic growth strategies)
- Target Definition (Financial, Operational and Organizational Characteristics of the target entity)
Selection
- Target Search (Identification and Interest Assessment)
- Deal Framework (Financial and Operational Objectives of the deal).
Due Diligence
- Financial/Asset Verification
- Organizational Assessment (Review of Structure, People, Culture, Processes and Information Systems)
Deal Structure and Negotiation
- Term Sheet
- Covenants
- Representations and Warranties
- Financing Components
- Implementation Planning (Combinatorial Possibilities of Products and Markets; Merging Financial Structures, Ledgers, Procedures, etc.; Combining Organization Structures and HR Policies; Optimizing Operational Procedures; Integrating/Consolidating Information Systems; and Realigning/Resizing Facilities for Relocations, if applicable)
Implementation and Realization
- Closing
- Implementation (Impartial Employee Evaluations, Position Selection, Process Reengineering, Information Systems Integration)
- Post-Implementation Review (Continually tuning the entire combined organization)
Citations
The following paragraphs describe two examples of how we put our knowledge and skill to work by leveraging one or more of the above listed Merger and Acquisition stages to the benefit of the businesses we helped.
Example One - Merger
Led a team with General Counsel that consolidated Citibank (Maryland), N.A. into Citibank (South Dakota), N.A., the main credit card bank for Citicorp. Spanning one and a half years this project dealt with all legal, regulatory, tax, accounting, and systems issues.
Result: Realized a significant reduction in overall total operating costs for the combined entities as the 1,000-plus employee Maryland operation was consolidated in South Dakota.
Example Two – Acquisition
Led the acquisition and restructuring of a national interior décor and high-volume art manufacturer and distributor. Assignment included analyzing product and service profitability; identifying and eliminating obsolete inventory; rearranging the placement of raw materials and finished goods inventory within the warehouse and reengineering sales, manufacturing and fulfillment processes. The sales function was also enhanced by expanding the responsibilities of the account managers to include sales calls to non-clients; instituting procedures to manage the sales funnel and initiating sales to new industries.
Result: Liquidated obsolete inventory, increased warehouse capacity by 20%, reduced warehouse and production staff by 40% using downsizing and replacing permanent, low-skilled employees with temporary labor; re-priced some service offerings producing a 20% lower breakeven point. In just eight weeks, generated new proposals equal to 30% of prior year’s annual product and services sales.
If you would like help planning and implementing the merger or acquisition please Contact Us.