Accounting & Auditing Blog

Mergers & Acquisitions: How to set the stage for a merger and acquisition that is fair to both parties

When selling your company, parting with it can be difficult. You’ve spent countless hours growing the business from a small operation to the enterprise it is today, and that shouldn’t be minimized. But decision making in the early stages of this process can be guided more by emotion than logic.

As the project progresses, however, emotion lessens and upfront planning on both sides predicates whether the deal is finalized.

Almost always when a deal doesn’t work, it’s because the proper things leading up to the merger and acquisition weren’t done — they were shortcut — and sometimes that leaves a nasty trail that has to be picked up.

What factors should be first considered with mergers and acquisitions?

When looking to acquire a business, determine your strategic goals. Do you want to expand geographically, add to your current type of business or acquire a tuck-in or bolton that could be a smaller, complementary piece to your existing company?  Does it make sense to stay in your area or expand to another part of the state or country?  Pricing is another factor. What can you truly afford and how will you pay for it — with your own working capital or borrow from investors, a bank or a private equity group? On the other side, a business owner looking to sell needs to find individuals or companies with which he or she feels comfortable while getting ready for the liquidity event. Hire experienced professionals — CPAs, lawyers, investment bankers or financial advisers — who work on mergers and acquisitions. Price is important for this side of the deal, too, and could be determined by a multiple of sales, net income, or earnings before interest, taxes, depreciation and amortization (EBITDA).

Click here to read more about setting the stage for a merger and acquisition that is fair to both parties.

For more information about our Cleveland transaction advisory services, contact Ken Haffey by leaving a message below or by calling 440-449-6800.

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