We’re seeing a trend that is affecting many entrepreneurs in various industries. Sometimes an entrepreneur finds himself too young to retire, the funds required to buy him out are too high, or his company is not yet at its peak. Sometimes, there’s another company in the market that’s complementary on certain levels… a merger can be a very interesting option.
Certain key elements need to be carefully planned.
- Roles and responsibilities: two companies mean two managers – and therefore two visions, values, styles, and roles. We need to clarify as many points as possible before proceeding… because when 2 SMEs merge, there are as many emotions as situations to manage. Without the success of these aspects, it’s not worth going any further in the process.
- People and organization: we often look for economies of scale, to increase sales and structure, but we need to plan carefully who will do what during the transaction; who will manage which issues; a company is, after all, the sum of individuals – we must not lose them in such an operation, but rather help them grow.
- Expected gains – i.e. the business case: will we benefit from operational economies of scale – whether in terms of production capacity, distribution, process integration, or the power to approach new customers with complementary products – we need to identify the reasons for such a move – all of which will allow us to be more competitive and gain access to new markets.
- Processes, Procedures and Technology: these are the areas that entrepreneurs often neglect – we have to be careful, because economies of scale will come from this organizational aspect – but exponential costs can also be found here…
- Valuation: both companies must be treated in a comparable manner, considering their differences.
- The legal and accounting/tax process of the merger: once the operational and human aspects have been planned, the tactics of the merger must not be neglected.