By Mary Erb
TAKING part in a merger can be fraught with pitfalls. But many companies fail to invest the time and effort in what can be a make or break move for the businesses concerned.
Without careful planning, the tie-up can present a huge burden which can take years to resolve – reducing the business advantages of the merger and sapping the strength of the new, combined operation.
Here Mary Erb from leading corporate law firm Heatons, lists a dozen key steps to achieving a successful merger:
1) Spend a lot of time identifying and researching potential business partners – don’t just go with the first proposal that presents itself.
2) Make sure there is a good ‘cultural’ fit as well as a sound commercial one.
3) Ensure you appoint respected and experienced professional advisers to represent you.
4) Involve your bank or institutional funder as early as possible.
5) Be prepared to dedicate a lot of time to negotiations with the management team of the other business and their advisers. Ensure you have sufficient information about them on which to agree terms for the deal.
6) Following negotiations, heads of terms will be drawn up. As well as recording the fundamentals of the deal, these will probably grant each party a period of exclusivity to undertake financial and legal due diligence. Use this period wisely. Establish exactly what you are intending to achieve – is it as sound a commercial move as you expected and are those magical ‘synergies’ really going to appear in an acceptable time frame.
7) Check your bank is still supportive. If they are, ask them to detail the terms of their commitment.
8) Examine the continuity of suppliers and transferability of any contracts affected by the merger.
9) Check whether key staff will remain committed after the deal has been done – keep them well and carefully informed to avoid confusion about the deal.
10) Don’t neglect your existing business during the merger process – the corporate graveyard is littered with sound businesses that fell apart because management took their eyes off the ball.
11) Don’t forget that you may need the approval of your shareholders in order to complete the deal.
12) If you’ve reached this point and are satisfied that all relevant areas have been addressed satisfactorily, completion can take place. Congratulations!
A final word of warning. Don’t underestimate the time, resources, energy, enthusiasm and commitment that will be needed after completion of the merger to successfully integrate the businesses.