Completing a successful merger can be challenging, but if you do your homework and negotiate with a sound business strategy, it will likely be easier than you think.
My company Quick Solutions Inc. recently merged with Fusion Alliance Inc., and we learned valuable lessons in the year it took to close the deal.
To many, “merger” conjures up visions of employee layoffs, leadership changes and customer losses. Calling the merger a “combination” is a friendlier — and more accurate — descriptor. Two separate entities come together to form a third one that combines the best of both.
A compatible partner
Why even consider a merger? It takes considerable time and resources, and there are no guarantees it will be successful.
One reason is to expand your geographic footprint. It’s extremely difficult to grow organically into a new city, where you compete with already established companies. The business landscape is littered with companies that have tried to do just that and failed.
Finding a compatible business is the first step; a sound business strategy is key.
Culture is critical
A merger will be successful only if both companies share similar cultures. Combining two companies with diametrically opposed philosophies never works.
Choose one whose culture aligns with yours, and, before formalizing an agreement, do your homework. Talk with employees, clients, companies it does business with, competitors, etc. Look for lawsuits filed, or negative press.
Don’t think you can change a culture after the merger goes through — it won’t happen.
Other factors
What else contributes to a winning strategy?
- Consider location and be strategic. For fewer headaches, choose one that is relatively close and fits the geographic footprint you want to create.
- Look for core offerings similar to or complementary with yours. You want to expand your product and service lines with a company that has a proven track record of profitability and cash flow.
- Gauge leadership expertise. An experienced management team that wants to be a part of a successful larger company is important.
- Seek out a variety of skill sets. A blend of technology expertise, financial acumen, operational skills and business development capabilities is ideal.
- Check out the relationship with customers. You want to integrate that client base with yours, so it’s important customers don’t jump ship.
- Choose a firm with a long-term growth strategy and potential for revenue growth. Avoid a troubled company that’s looking for a bailout.
- Make sure it makes sense financially. Don’t pay ridiculous sums just to have a presence in another location.
A successful merger depends on good communication among the leadership teams and employees. Everyone has to understand you’re combining to join the best of both companies. Communicate well, and your efforts will be rewarded.
Tom Campbell is a partner at Fusion Alliance LLC. Tom, a Certified Public Accountant, has 30-plus years of senior management experience. Prior to Fusion, Tom was majority shareholder and CEO of Quick Solutions Inc. He also spent 12 years as the COO of an international distribution company and has held senior management positions in the technology and real estate industries.
