You want your company to grow, so you look into acquiring another business or combining your operations with a competitor’s. Successful mergers and acquisitions can help a company rebrand, reach a much larger portion of the market and expand without the risk of taking on untested staff members.
However, trying to buy or partner with another company is not without unique risks. According to research published by Harvard Business Review, somewhere between 70% and 90% of business mergers or acquisitions ultimately fail, with dire consequences for the companies involved.
How can you protect your business against the possibility of a failed acquisition or merger?
Do your due diligence before making an offer
Offering far more than another company is worth or trying to negotiate a transaction with a company that has historically been quite hostile to outside interests could prove to be a waste of your company’s resources.
You want to only spend your time considering companies that are worth what you would pay to acquire them or that are at least open to outside cooperation. Doing significant research into the existing players in your industry or in the field into which you want to expand can save your company a lot of time and frustration later. You may also need to work with experts who are capable of helping you determine an approximate value for the company in question before you initiate negotiations.
Don’t take anything for granted
From what talent you can potentially keep at your company to how much revenue the other business generates, you don’t want to make assumptions about major elements in a merger or acquisition.
From developing a plan to retain key talent at your company and the company acquire to bringing in the right forensic accountant to review the other business’s books as you finalize the terms of the transaction, there are many steps you can take to help clarify the most important concerns and protect your company against overextending itself in a dangerous manner.
Compare the costs with internal development
Buying a business that already has a known brand name can be a great way to expand into an existing niche of the marketplace, but it can also cost multiple times more than developing your own brand in that area.
Before you decide on the right approach for growing your company, it is typically best to keep an open mind when looking at all options. Making sure that you have the resources necessary to complete the transaction, ensuring that you don’t offer more than the company is worth and negotiating so that the arrangements are favorable are all crucial if you hope to complete a merger with another company or acquire an existing business.