WHY DOES M&A SOUND SO EASY BUT IS ACTUALLY MORE COMPLEX?
We find that competition is fierce in many of our sectors and sub-sectors, meaning the only way to achieve double-digit growth is through acquisitions. M&A can be an important means for building scale, improving a target’s performance and can fuel long term, profitable growth. Surely this can’t be that hard; find a company, make an offer, complete the deal, merge the clients and staff and you have a bigger entity – Simple right?
Well, not really. The reality is that small to medium-sized acquirers often find that their success ratio in finding the right target to completing a deal can be less than 50%; that means a lot of time, effort and money is spent on a project that leads to nowhere and is often to the detriment of the business itself.
So Why Is It So Difficult?
To make a merger or acquisition work, it is vital to have a sound strategic plan so that maximum benefit is taken out from the merger. Before signing on the dotted line, the company doing the acquisition must evaluate the performance, market position, cash flows, future opportunities, technology, regulatory issues of the target company to fix the right price for the deal. The management of the company doing the acquisition must have a clear and well-defined strategy for their specific business. This is just the overall picture, here are a few finer details worth mentioning into the complexities of M&A:
- On average a buyer needs to make 20 to 30 approaches just to find the right target
- The buyer and seller are often unadvised meaning difficult conversations are unmoderated which can lead to conflict.
- The seller has nothing to lose so is often happy to go along with a process until it means signing on the dotted line.
- Maintaining a business and also a sale process can be difficult in many organisations, leading to delays in the process and a loss of confidence in the seller.
- Obstacles will present themselves in every deal no matter how big or small, and handling them to achieve a win-win for both parties can often be very difficult.
- Sellers often have last-minute “seller’s remorse” that can lead to them pulling out of the deal at the last minute
- Sellers can make demands in the eleventh hour which may be unreasonable to the buyer, leading to conflict and heightened emotions and lack of trust.
Overall, every M&A process needs experience, support, moderation and careful project management to keep the process on track, as well as expert handling of relationships on both the buyer and seller’s side. Businesses that are planning to engage in strategic deal-making should focus on partnering with experienced advisors to improve their chances of hitting a bulls-eye.
Venture Corporate Finance have a structured and proven M&A programme that can help with the heavy lifting and ensure that your time is spent with the right sellers.
You’ll get support throughout the process to ensure that when you make an offer, it has the best chance of completion. Our six-month programmes are designed with the obstacles mentioned above in mind, we believe that you will have an offer for the target company within this timeframe.
Check out our M&A programme for your business
Venture Corporate Finance is a middle-market M&A advisory firm for clients planning to sell their businesses, raise capital, restructure, or grow with acquisitions. We provide independent advice and bespoke transaction solutions to meet their specific objectives.
For more information on corporate finance and M&A services, contact Venture Corporate Finance.