M&A FAQs: We Answer Your Questions
The team at Benchmark International is often approached by business owners with questions about M&A and what the typical process looks like. As with most things in the business world, one merger or acquisition is rarely the same as the last, but there are some key areas that you need to be aware of if you are thinking of buying or selling a business.
Here we answer some of the most common questions we get asked.
What are the factors that traditionally motivate businesses to opt for M&A?
There are a number of reasons why businesses consider a merger or acquisition. Unsurprisingly, the main reason usually boils down to improving financial performance. This can be achieved by M&A through increasing a company’s market share and gaining new territory as well as searching for and implementing synergies, whether that is reducing fixed costs or eliminating duplicate functions. When it comes to businesses in the small- to mid-market, retirement and succession planning are also major contributing factors.
How long does the M&A process take?
The time it takes to sell a business comes down to a number of factors including negotiations around the value of the business, geographic location, the type of business that it is, market conditions and the method of financing. Typically, small business purchases can be completed in less than 12 months, whereas a mid-market company can be a year or more, depending on the aforementioned factors.
Is there a particular time that I should sell my business?
It is always advised that you sell your business when it is performing well financially. However, it does not always happen this way, some sales can come down to succession planning. On the other hand, it goes without saying that buyers want to acquire a business when profits are steady or increasing.
How can I reduce the risk of losing employees after an M&A deal?
This is the most common concern that business owners have. It is true that M&A deals can prove to be a deeply unsettling time for staff as they can feel like their role is at risk, that they are out of the loop or the working culture they know will soon become a thing of the past. In order to prevent this, business owners must get their communication strategy absolutely right during the M&A process and let employees know of any movements and changes every step of the way. They must also find a way to let employees know that their skills and experience are highly valued in the business and, if necessary, provide a financial incentive to stay.
What is the most common mistake that sellers make in M&A?
In our experience, sellers can have unrealistic expectations of what their business is worth. In all cases, we work to try and maximise the business value for our clients in order for it to achieve the best possible price on the market.
Do I need help selling my business or can I just sell it myself?
If you have knowledge of the M&A process and how it all works then you can, of course, sell your business on your own. However, an owner is an expert at running their business, not selling one, and they do not have access to an established network of buyers or the experience it takes to manage the sale.
Also, your skills as a business owner are better utilised on business operations to ensure that everything is operating at its peak. If you spend the majority of your time focusing on the sale and the business suffers as a result, acquirers are likely to want to renegotiate on the price. What a lot of business owners who are selling their business forget is that any drop in business performance has a direct effect on the valuation and, in the worst cases, can lead to the deal falling through.
Working with a partner such as Benchmark International will give you access to an experienced team of financial marketing and negotiating specialists as well as our international database of buyers.
With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.