Brought to you by Redcap&Truss:
In the world of business, decisions are made on a daily basis. Some decisions, such as hiring a staff member on a team, can be vital for the short term. Other choices made, like negotiating a business merger between two companies, will be much more critical in the long term.
Business mergers happen all the time, but the process tends to be multifaceted in nature. Prior to the merger, an extensive negotiation process must take place, discussing topics such as the purchase price and the legal representations. Consulting a business advisory firm is highly advised to guide you through the negotiation process.
For a business merger to be successful, all relevant parties must come together to agree upon a set of conditions. In this distinct procedure, here is a guide on how your company can negotiate a business merger:
Purchase Price
The most important factor that will be negotiated is the purchase price of the overall merger. All companies involved in the process will have to come to the table with their best offers in mind at the onset. A purchase price is negotiated based on a number of factors, such as how the funds will be paid.
In other instances, the price will be representative of which party will own other parts of the income sources. Areas, like dividend rights or liquidation preferences, will have to be discussed prior to the merger. If any party has ideas on how to efficiently negotiate the purchase price, it will have to be discussed eventually.
Legal Representations
There are also many aspects of the negotiation process that have to do with the rights to various properties. For example, titles to assets and financial statements will comprise a large part of what one company brings to the table. In some cases, the intellectual property of a piece of technology will also be discussed in terms of ownership.
Strategy
Once the important factors of purchase price and ownership of properties are discussed, strategizing is next. A business merger should only be pursued with the right goal in mind. In order to reach a new market, for example, two companies may come together. The assets that are combined here may allow the business to reach new heights.
As a result, it’s never too early to start thinking about ways in which the merger can be as effective as possible. Each company will have its own strengths, which could be used throughout the process.
Communication
Communication is important for getting through a merger successfully. This will be a critical time for all involved parties within each company. There should be no room for assumptions, as transparency will be critical as each phase progresses. Set meetings with all senior professionals and be prepared to discuss what your goal is.
If need be, you may also want to discuss confidential matters privately. All employees should know about the merger well ahead of time. However, there may be other factors that need to be privately discussed with individuals, such as the president of each business. That way, all parties will be happy at the end of the day.
Target Markers
Breaking through the proverbial glass ceiling is something that all businesses want to do. Making profits in areas never ventured through can be an extremely exciting endeavor to undertake. As such, at the preliminary stages of your merger discussions, think about your short-term and long-term prospects.
Your short-term target markers are important for a number of reasons. First, they demonstrate that the merger is indeed working as intended, so you can continue along this set path. Research is incredibly important. You’ll want to ensure that you are taking the right steps. Once those projections have been fulfilled, success will be within the company’s reach.
Advisors
When it comes to strategizing accordingly for the future, third-party advice may be warranted. It isn’t uncommon for companies of all sizes to seek the services of a professional advisor. These professionals come from a variety of backgrounds, which can be helpful to each party.
For example, advisors can assist each company with the financial aspect of the negotiation process. Topics, such as tax structuring, will have to be discussed at some point during the procedure. Plus, every negotiation stage will require contracts to be drawn up at some point. It would be in your best interest to seek these individuals out as early as possible!
Once the gears are in motion, the negotiation process will move along as efficiently as possible. Just be sure to talk about all important matters upfront and in a genuine manner. Clarity is important for the new company to reap the benefits at the end of the day.
