Maybe it was the surprise telephone call you received, or one you placed that surprised someone else. Either way, it is important to discern the other organization’s motivation, purpose and goals in affiliating with your business before you leap into a merger or acquisition (M&A).
Experts from Forbes and other entities believe doing your due diligence now will lead to new heights rather than headaches later. According to a Deloitte survey of global M&A leaders, 57percent use tools to gather crucial data to produce an accurate portrayal of a company’s reputation. About 74 percent of companies evaluate portfolios and investments from an environmental, social and governance (ESG) perspective to identify how responsibly a company operates and fulfills its defined purpose.
Alignment: Do the other company’s mission, vision, corporate culture and development goals align with yours? Determining fit is key before reviewing financial documents. It’s a good idea to secure a financial broker and attorney to represent your interests, discover and then navigate information you need to know.
Deal-breaking decisions: Is a company that wants your technology, but not your employees, acceptable to you? Would your company name be preserved or relinquished? Would you be surrendering control of day-to-day activities, or would the transaction be invisible to your customers? Would a merger combine the best of both companies, with your company being better off than before? Ask these hard questions before you get too far down the road.
Analysis: Just as your gut feelings often reveal what you should acknowledge, whether you like it or not, conducting a SWOT (strengths, weaknesses, opportunities, threats) analysis for strategic planning will enable you to gather information about the company, competitors and customers effectively. You may learn about any gaps and whether another organization is having cash flow problems and needs rescued.
Check financial statements: Look at the potential partner’s income statement, balance sheet and statement of cash flow to reveal the big picture of profitability and areas of pride and vulnerability.
Why the buy? Most companies have a specific reason for seeking a partnership. Does your acquiring entity covet your client list, employee talent, or technological expertise? Would you be a reputation rescuer by engaging with them, or truly be better together?
Not the time to DIY: Have you ever planned to do it yourself, only to find you’re woefully unprepared? When you hire proven specialists, what you learn can tell you a lot about your potential partner’s reputation, metrics, customer care and associate awareness.
Listen to the people: At my firm, we are dedicated to listening to the voice of the customer. The results sometimes do not match what the client wants to hear. Talk to the people who matter — customers, past and present employees, vendors and shareholders. Review social media history for candid comments. Paperwork does not tell the whole story. You wouldn’t choose to align your caring company with a more profitable one if employee morale there is low, customers do not feel heard and vendors are frustrated.
Keeping current: Are the other organization’s contractual obligations current? What are the professional reputations of company leaders in the industry and community?
Just as when buying a house, there may not be the perfect time for this transaction. Some aspects will need improvement. By doing your research, you’ll enter a merger and acquisition situation as well informed as possible, whether you’re pursuing a new alliance or being sought for one.
Michele Cuthbert is CEO and creator at Baker Creative
