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M&A transactions

In Merger and Acquisition (M&A) transactions there are several important factors that directors, finance corporations, and other stakeholders have to consider.

The process can be complicated and it requires significant expertise to complete a truly successful transaction. Whatever the initial reason for the deal – quashing the competition by buying rival companies, increasing business productivity, saving a business from going bust or targeting a new market, the process starts and ends with a strategic plan.

Deal volumes across the north west were down by just over 30 per cent for the year so far to 325 compared to2016’s figure of 465, according to Experian MarketIQ’s half year UK M&A report. But despite economic and political uncertainties (Brexit, global growth, interest rates rises), the north west has seen strong deal activity in the financial services, professional services, sales and lettings, manufacturing and construction sectors.

Iconic deals for Liverpool in particular, have included the sale of the Royal Liver building, which sold for over £48million. No company wants a bad deal, but unfortunately sometimes it happens. Whether through bad planning or failure to properly consider what the parties want to achieve.

Outlined are Ed’s 5 key points to consider before embarking on a M&A;

  1. ENSURE A CLEAR AND STRONG STRATEGY IS IN PLACE

There will be a lot of hurdles and synergies to overcome – culture fit, geographical location, accessing the market – which all need to be considered. Too often parties plan only to completion without enough thought about what is going to happen after completion and this can easily turn a good deal into a bad one.

  1. FINANCIAL STABILITY IS KEY

Solid liquidity over and above profitand loss is very important. Has your business got the financial capability / liquidity to make and sustain an investment? Can your capital structure take the strain? Can you handle significant debts and access funding? Recent trends have shown that many companies are hoarding cash. Equally, banks have the money to lend at relatively good rates. However, if interest rates increase, businesses will need more money set aside to service loans, and other finance. So assessing and monitoring the financial stability of a target company is crucial.

  1. COLLATE THE PERFECT TEAM

It is really important to have a cohesive team – finance, sales, marketing and operations need to be compatible – aswell as having strong experts to guide you – legal advisors, valuation experts, bankers, accountants and tax advisors.

  1. UNDERSTAND THE OBJECTIVE YOU ARE TRYING TO ACHIEVE

Establishing the goals of your business will keep you on the right track throughout the process. Having the right KPI’s and reporting structures will ensure your eye is not taken off the ball. And ensure the processes are well communicated throughout.

  1. IDENTIFY A STRONG LEADERSHIP TEAM

Organisational changes can cause uncertainty no matter what size the organisation. Business change is naturally something a lot of employees won’t respond well to. Ensuring you have a strong leadership team, focused on employee engagement and employee communication (for both employees within your organisation and the business to be acquired) is essential to help communicate the strategic plan.

M&A transactions should be carefully planned with expert guidance and it is always advisable to use an experienced lawyer with the knowledge and understanding of dealing with this kind of corporate work.

DTM Legal’s Corporate and Commercial Team have recently worked on two major deals including the sale of one of the UK’s biggest independent newspaper groups and the acquisition of Port Dinorwic by The Marine & Property Group Ltd.

Find out more about the acquisition of Port Dinorwic > CLICK HERE

For more information contact Edward Barnes on 01244 354829

Edward Barnes

Edward Barnes Head of Corporate & Commercial

 

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