Form Successful Mergers Using Successful Strategies

Dec 24, 2020 | Financial Planning

Acquiring another company and merging it with your business can be the most efficient way to grow. But many acquisitions don’t pay off and it’s often management issues — not market conditions — that get in the way.

Here are eight key strategies that spell the difference between success and failure in mergers and acquisitions, no matter what the size of the companies involved:

Pre-Merger Strategies

    1. Consider the fit. If two businesses don’t have compatible goals and ethics, merging them can be counter-productive. This includes financial structures that can be merged, as well as compatible customer bases and corporate cultures that aren’t radically different.
    2. Listen to the seller. Money often isn’t the deal-breaker. If you can satisfy the seller’s non-financial concerns, you’ll have more negotiating power and the deal will go more smoothly.
    3. Hit the books. Thorough due diligence is essential and requires a knowledgeable and relentless approach. Besides careful accounting, spot check with customers, chat with vendors and employees and talk to the neighbors. The more you know, the fewer surprises you’ll encounter.
    4. Develop a game plan. Long before the purchase agreement is signed, there should be a detailed road map in place for joining the two operations.
    5. Trust your gut. Even when an investigation makes the details look good, if the deal doesn’t smell right, don’t be reluctant to back out. Like gambling, you have to know when to walk away.

Post-Merger Strategies

  1. Pick a team. Before you announce the merger, know who’s going to be in charge at the new company. That person will need plenty of time to focus on the task at hand and won’t be able to just add these duties to current assignments. Make sure that person has plenty of time to devote to what can be an arduous task. Don’t automatically get rid of the acquired company’s old guard. Evidence shows that their experience provides stability and helps navigate the shoals.
  2. Consider the culture. Little things like who gets invited to a company party can throw a merged operation into a tizzy. The more you know about the acquired company’s culture, the more likely you can head off potential explosions.
  3. Talk, talk and talk some more. Controlling rumors among employees, shareholders and vendors is very important. Be open and honest in telling them what they need to know in order to feel secure enough to go about their business. 

Consult with your advisors before completing any plans for a takeover or merger.

Recent Posts

Get Ahead of Taxable Benefits

Get Ahead of Taxable Benefits

As year end approaches, businesses have plenty of tax and payroll tasks competing for attention. One easy-to-overlook area is employee and owner benefits. Identifying taxable benefits before the final payroll runs of 2026 can help prevent reporting errors, payroll tax...

Could You Owe the NIIT?

Could You Owe the NIIT?

Selling a highly appreciated investment late in the year could trigger an additional tax cost: the 3.8% net investment income tax (NIIT). If you’re considering a significant transaction before January 1, first estimate the potential tax impact and evaluate planning...

Tax-Smart Building Improvements

Tax-Smart Building Improvements

If your business is planning improvements to a building before year end, careful planning may allow you to maximize your 2026 tax deduction. A special safe harbor can allow qualifying small businesses to deduct such expenditures currently — but only if expenses don’t...

Charitable Givers Get a New Tax Break

Charitable Givers Get a New Tax Break

Beginning in 2026, taxpayers who take the standard deduction may deduct up to $1,000 of qualifying charitable contributions, or up to $2,000 for married couples filing jointly. Only cash contributions qualify, such as gifts made by check, debit or credit card, payment...