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Top Tips For A Company Acquiring Another

Written by: John Ryan

Article Overview: Often times a business that is for sale is acquired by a larger complimentary corporate concern instead of an entrepreneur wishing to start out in business. The hurdles involved in the merging of such an organisation can lead to loss of productivity, confusion and can be a destabilizing force for both concerns. This article outlines some of the main issues.

Top Tips For A Company Acquiring Another

Often times businesses that are for sale are not bought by an entrepreneur but by a larger concern. These acquisitions can cause many issues which delay the handover and cause loss of productivity. We have observed a number of trends time and time again with these types of transactions. Many of these hurdles can be overcome with prior planning. We’ve noted that the most common issues are:

* Staff morale: staff concerns about their job position can lead to strikes and loss of productivity.

* Payments: staff that are in equal positions in both companies but are on different payment structures/pension plans. The acquisition can lead to one losing out, or salary expenses increasing.

* Possibility of anti-competition government regulations.

* Power struggle of top directors/management – sometimes when one of the founders/MD of one of the acquired companies departs, the merged company can lose its focus, direction and vision.

* Not doing due diligence accurately can cause hidden expenses or unforeseen legislation to destabilize the concern- one good example are companies buying manufacturers who in the past may have being involved with Asbestos based products. These businesses could be exposed to extensive litigation in the future, which could almost bankrupt the parent company.

* Falling stock price of both companies can cause shareholder anger/concern (staff share option value decreases) as could be seen by the merger of AOL and Timer Warner.

* Clash of cultures can be severely limiting to a company- new rules and methodologies can cause key sales, accounts, IT, designers (sometimes the very reason you pursued the merger) to leave a company- causing instability and a “brain drain”, as can be sometimes seen when a more established technology business or Fortune 500 member tries to purchase a start-up company.

* Downgrading of one HQ to the dominant acquirer partner HQ can lose a certain essence, as many of the core staff chose not to move.

* Potential incompatibility between the different IT systems can lead to lost productivity and major expense and frustration while integrating their systems.

* In summary, it is critical to have transition committees set-up well in advance to iron out the most contentious issues.

For more information contact: johnryan@thebusinessshop.ie

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