Can you grow your business successfully through a merger or acquisition? Absolutely, and it often is a faster route to expanding market share and moving into new markets, improving distribution channels, accessing funds, diversifying and reducing your own costs and overhead through shared budgets.
While visions of streamlined operations and improved profitability are tempting, you must also be aware of the pitfalls. For just as there are many positive M&A examples to be found, there are also just as many negative aspects - even between large, sophisticated corporations.
Mergers and acquisitions involving $50 million or more in assets are subject to review by the Federal Trade Commission (FTC) or the Department of Justice (DOJ) under the Hart-Scott-Rodino Act, but even smaller entities may be scrutinized.
If you are contemplating entering an asset sale, merger or acquisition with another business, make sure you consider the following:
- Have you done your due diligence? Find out why the target company is for sale and if there have been prior attempts to sell the business. Review the business' market and business plan. Look at its employee manual, total compensation and employment agreements. And of course, check five years' worth of tax returns, audited financial statements if available, cash flow analysis and especially disclosures. An accurate business evaluation is absolutely essential to a successful M&A.
- Do you have the support you need? You also need enforceable warranties and representatives from the other party.
- Is the deal in alignment with your corporate strategy? Straying from your core business can be a recipe for disaster.
- Do you have the experienced management manpower to handle the deal without running your own business into the ground? You may unknowingly put your own business at risk if you enter into an M&A without having a strong management team in place to handle the transition.
- Is your corporate philosophy and culture compatible with that of the target?
- Is this your best choice? Have you weighed the risks and rewards of an M&A against other options?
Lastly, do you have a legal partner who can help you through the process by ensuring regulatory compliance, reviewing contracts and protecting your best interests?
The business law attorneys of Hess Law Office, PA bring skill, experience and knowledge of the local and regional business landscape to bear in making sure that our clients receive efficient, effective counsel in all their M&A endeavors.