The Recipe for a Strong Merger & Acquisition

Properly planning and executing the merger of two companies can mean the difference between success and failure of the newly structured business. Successful mergers require planning, forethought, and above all, commitment. Here are five ingredients in the recipe for a strong merger or acquisition.

1) It’s a good match. The royal houses of Europe spent an inordinate amount of time shoring up their power through coordinated and strategic unions of their children. Like royal marriage, mergers should be coordinated and strategic. In some cases they will be expected or make obvious sense. In other cases, however, successful mergers and acquisitions have resulted from thinking out of the box to find an industry or other niche that fits well in an unexpected way. Regardless of whether the merger or acquisition seems obvious or surprising, a high level of vetting and due diligence will be required to make sure the target of the merger or acquisition is a good fit.

2) There is good communication. Early discussions between potential merger partners are almost always highly positive and focused on the easy aspects of the deal. It important, however, to make sure both parties also communicate openly about the challenging aspects of the transaction. This includes discussions about problem customers/clients, potential liabilities, threats to the business, challenges from competitors, and numerous other issues that could come up. This is important not only for transparency, but for the merger partners to earn each other’s’ trust and get a feel for how the other deals with negative situations.

3) Both parties are committed. Commitment here means more than a signature on a term sheet or letter of intent. Commitment in a successful merger means that both parties are willing to make sacrifices. This could mean being willing to change or give up a business name or brand, or agreeing to spin off or close a line of business that would be redundant or unnecessary in the new combined company.

4) There is a plan to succeed. The amount of pre-merger planning that is necessary to maximize the likelihood of success cannot be overstated. No amount of planning can guarantee a positive outcome, but there is a proven benefit to (a) anticipating challenges before they arise, and (b) having solutions planned out in advance.  This applies not only to obstacles that the companies face before the merger, but after as well. The more planning involved, the smoother the transition.

5) Competent, experienced legal counsel.  One of the most important elements of a successful merger or acquisition is having competent legal counsel looking out for you from the beginning. From advising regarding terms of the merger agreement to the various local, state, and federal laws implicated by a merger, a law firm that is well-versed in mergers and acquisitions is an asset that will pay dividends for years to come. The Law Office of Chris Clark is such a firm and is ready to help get your merger off the ground today.

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