Mergers and Acquisitions – Part 2
3 Steps On How To Prepare Your Business For A Merger Or Acquisition
In our first article on Mergers and Acquisitions (M & A’s), we covered why they may be a good idea for certain businesses in 2021. The main idea to keep in mind we pointed towards: strategy. And since this year will be the year of the client, we also talked about the idea of making your customer journey as convenient as possible.
Strategy and Customer Convenience
From the perspective of what a successful merger or acquisition looks like, these two concepts 1) Strategy and 2) Customer Convenience could be valuable contributions to your newly combined or acquired assets and defined strategy.
Before we get started, we always want to remind readers that our research is intended to spark new ideas and inspire folks to take a moment and think outside of their respective boxes (before they jump back in and begin the next steps of work!)
Remember, if you’re a company looking to enter a merger or acquisition, you’ll want to consult with accounting, tax, banking and legal representatives who are experienced in these fields.
3 Steps For Preparing Your Business
Now, back to the ‘how’. In this article we’ll walk you through 3 steps for preparing your business with the aim at growing or selling your business with M & A’s. These are high-level concepts that can provide a productive trickle down effect for the preparation of your business for M & A’s.
So you’re on the path to a merger, looking to acquire another business, or be acquired. The overall strategy for how to prepare your business is relatively the same in all 3 cases. Yes, there are distinct processes that will be used for different types of businesses. But, the main course and outcomes remain the same.
1. Decide on Your Type of Merger
A. Will you be involved with a competitor who is in the same industry and market, offering similar services and products?
Example: 2 home cleaning services
B. Are you partnering with a company who sells similar solutions, but has access to a different and valuable customer base?
Example: 2 companies in different regions.
C. Will one company create products, services, and solutions to boost the other company?
Example: A parts manufacturer bought to produce for an automobile company.
D. Are you teaming up with a company from a different industry?
Example: A waste management company acquiring a commercial fleet distributor.
There are more configuration types available than we’ve listed here, but the main purposes behind them are advantageous market strategies and client relationships. If an M & A gives your company a solid advantage in the marketplace and helps you provide more clients with the easiest way to do business with you, then you might be on the right track.
2. Inventory, Assets, & Appraisals
Businesses are bought because their systems work. When a prospective buyer or partner looks into acquiring or merging with another company, the first question to answer is “how does it work?”
This question reflects everything from your sales and/or production process to the machines, hardware, and software used to push those processes forward.
How does it all work?
You should consider creating a comprehensive business process and assets manual that clearly fleshes out each part of your business. In the case of business equipment, you’ll benefit from documenting and appraising all of your equipment to determine its value. This is a critical step in ensuring that you are valuing your business properly.
Partnering With An Expert Business Equipment Appraiser
This is where a trusted, Certified Equipment Appraiser can be your greatest ally in ensuring you capture the value of your hard assets, create solid comparables, and nail down the market value of your operations.
This is an Auction Masters specialty. We believe in creating long-term relationships with clients so that they can operate with the peace of mind that they have certified business equipment appraisers who they can trust to get the best value possible.
You want to partner with an appraiser who displays an impeccable process, is known for a valued reputation in the related industries, and shows a successful track record in working with niches like yours. You want an appraiser who will do the right thing, the right way, every time.
With everything documented properly, you show that your company is a well-oiled, value-creating machine. The more organization and order your business shows, the more appealing it appears.
3. Prospective Partners or Buyers
Likely, if you’re reading this article you’ll already have a buyer or partner in line and ready to soon join forces. If you’re just beginning the next step of finding potential partners and/or buyers, then you have a few things to consider beyond the ‘types’ we mentioned above. These apply to both mergers and acquisitions, especially when an acquisition requires the newly formed company to retain talent from both businesses.
Will you have to rebuild or ‘build from scratch’ the process and systems that will allow your new partner to operate with a capacity to grow? Will you need to re-invent any wheels?
How much training and re-training will be necessary to get the new operations running smoothly?
Will you need to create a new company ‘culture’ or contribute extensive time and energy to establishing the new ‘way’?
You may find it very helpful for you and your team if these 3 obstacles can be engaged and answered, resulting in a cohesive ‘way’ that your company operates. If your potential partners have already created similar standards of their own, you may be a great fit.
Understanding how to identify potential obstacles like these could also save you time and headaches. You’ll have established the type of company you are and the types of companies that your team wants to partner with.
In our final article, we’ll dive deeper into the best way to appraise and sell assets for a merger. With the right focus, a company could receive great value on items that they may not have considered. If you have any questions about setting up an appraisal or an auction, contact Auction Masters today. We’ll be happy to help in any way we can.