ExecutiveChronicles.com | 7 Common Merger Mistakes to Avoid for Businesses | Thousands of public mergers take place each year. Those mergers are collectively worth billions of dollars. Why mergers occur varies from company to company, with some organizations needing a merger to stay afloat while others organizations are simply looking for better positioning.
Whatever the reason for a merger, the process of putting two companies together can get cumbersome, complicated, and expensive. What’s worse is that after working through those issues, many companies fail to realize the value of combining their resources.
If you’re considering a merger, the common merger mistakes we’ve compiled below are a must-read. By going through them, you’ll get an understanding of what pitfalls you’ll want to avoid to heighten your chances of striking a successful deal and reaping the benefits.
Going at It Alone
Several small and medium-sized business owners begin their merger processes by self-managing their ambitions. After having to deal with negotiations, valuations, and everything else that goes into combining company resources though, they quickly hire counsel.
Counsel in the world of mergers do all of the heavy lifting inexperienced individuals should avoid. Counsel can help you understated the implications of merging with a SPAC. They can let you know how mergers need to be handled when one of the companies is publicly-traded.
That just scratches the surface.
There are several M&A groups out there that work with companies of various sizes. Get in contact with a few and let them pitch you on how they can assist.
Being in a Pressured Position
Some mergers are set in motion to save a failing company. When a company is failing, payroll is at risk of getting missed, vendors are threatening to sue, leases are overdue, and pressure is mounting.
Negotiating a merger from a position like that is hard. It puts the party being acquired in a spot where they have to make several concessions and may not have time to do diligence on deal points. Needless to say, you don’t want to be in that position.
If your company is struggling and you’re eyeing a merger to avoid losing everything, start those conversations now as opposed to when you’re in the fire.
Losing Focus on Goals
Why do you want to merge with another company? What’s your goal?
As we’ve noted, there are several reasons why mergers take place. Knowing yours and keeping it at front of mind during every step of the deal process can help you ensure deal points move you in a desirable direction.
Many people that have pursued mergers get so caught up in doing a deal that they forget why they’re merging in the first place. That lack of focus can build your merged company on a poor foundation.
Waiting Until After to Visualize Restructures
One of the most common merger mistakes we see is companies not thinking enough about how restructuring might look. Saving restructuring conversations for post mergers creates a lot of scrambling which results in lost opportunity cost, staff morale issues, and more. Not talking about restructuring before merging might also lead to you not properly evaluating your deal.
Talk with your merging agent and the business you’re thinking of combining with about what management would look like after merging early. Understand what sorts of efficiencies/savings would result from that new structure.
These conversations, when had in a timely manner, will add new, valuable dimensions to negotiations.
Over-Hyping Your Merger Externally
Never share publicly intentions to merge with another company until after deal points are solidified. There are certainly legal barriers to staying too quiet about your intentions in some cases. If you’re able to remain discreet though, do so.
Saying too much about a deal before it’s done puts pressure on your deal to get done. That pressure can lead to unnecessary concessions in negotiations.
Furthermore, announcing mergers prematurely may lead to public scrutiny that could derail your deal altogether.
Keeping Employees in the Dark
It’s a delicate dance having to work through a merger when it comes to your team. On the one hand, sharing too much information can cause anxiety and bring your workplace to a halt. On the other hand, sharing too little can breed contempt and may also bring your workplace to a halt.
In our mind, the best policy is to share what deal points are locked if you think those points will have a direct impact on your team.
Certainly, letting your team know that unfavorable restructures are coming could cause issues. You owe it to your team members to give them the respect of information though, so share when it matters tactfully.
Not Having a Plan-B
Deals fall through all the time. If yours falls through, are you in a position to survive?
Make sure the benefits for mergers you were planning on don’t detail your company if things go south. By knowing exactly what you’ll do when conversations end, you’ll be in the best possible position to move forward.
You’re Now Privy to Common Merger Mistakes
Being in the know when it comes to common merger mistakes will help you avoid them. That’s an important advantage to have as you work through terms for mergers, the complexities of buying small companies, and more.
Our team wishes you the best as you manage the merger process. We also welcome you to learn more about how mergers work by exploring additional content on our blog.
Content is added weekly so there’s always something new to discover!