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Discover whether a merger or acquisition is the best route for your business and how a fractional CFO can make the process smoother.
As a business owner, you know the growth grind. Chasing sales, keeping costs to a minimum, dealing with customer queries, and maintaining staff morale. It really can feel like The Deadliest Catch.
No single business owner has ever managed to eliminate the grind. However, two opportunities to scale your business are mergers and acquisitions (M&A).
According to S&P Global, "North American M&A activity remained dismal in 2023 as high interest rates bore down on companies' M&A appetite for a second consecutive year."
It was prudent to put M&As on the back burner in 2023 due to high interest rates, with the total value of M&As in the US and Canada being a mere $1.222 trillion. However, with interest rates plateauing since late 2023 and the US showing signs of growth with consumer prices dropping 0.1% (June 2024), it might be worth delving into the wonderful world of M&As.
While business growth is the common reason for a merger or acquisition, many business owners turn to M&As for other reasons, such as:
Whatever reason you're thinking about a merger or acquisition, always speak with an experienced fractional CFO, such as the team at Kordis, about the pros and cons, process, and outcome.
A good CFO will walk you through the before, during, and after of an M&A transaction. They will accompany you every step of the way. With more than 100 years of combined experience, our team has put together five tips for a seamless, successful, and less stressful M&A:
If you want a little love from other businesses, make your company look like a million dollars. Be known as a sector leader, optimize your business, and maintain the right profile for your target customers.
As a business and as a business owner, be known in the sector. It adds credence to your stature in the industry and makes your company more attractive to other businesses.
Grinding for sales and keeping your purse strings pulled tight are even more important as you search for an M&A. Investments should be curtailed at the expense of cold-hard profit margins. The time for investments will be once the transaction is complete.
It is vital not to lose sight of your customer base. Keeping your products, services, service levels/guarantees, and even your corporate governance strategy the same is critical to meeting the demands of your current customers. They are your greatest asset and may be why the M&A is happening in the first place.
Just like a good wedding, you have to get there on time. Transaction timing, market timing, tech timing, etc, must all be aligned to take full advantage of the merger or acquisition. Timing is critical to get the best bang for your buck, and a robust strategic vision is essential to keep the bucks coming in.
Your multi-year strategy should align with your financial projections and original objective to acquire technology, reduce competition, gain more customers, etc. Validate the strategy with your stakeholders as part of the M&A change management process.
Simply put, the deal must make financial sense for you and those merging, being acquired, or acquiring your business.
Understanding your business's financial health—now and in the future—is critical and goes beyond revenue, costs, and profit margin. Your accounting team can show you the numbers. Alternatively, you can use a reporting visualization platform such as Kordis Reports.
Seek the support of an experienced CFO to build out your 2 to 3-year projections with appropriate inputs from sales, marketing, manufacturing, distribution, etc, to ensure that various growth, market, customer, and technology scenarios are modeled and reviewed. And one week later, review them again.
There's a reason why every business does the growth grind because it works. Slowly but surely, it works. Before you put pen to paper, ask yourself, does this transaction still meet its original objective?
M&As are expensive business activities, not least the actual cost of the acquisition or business merger. Costs are incurred before you look at the books, during the legal tussle between companies, and even after the transaction is completed.
Your consulting CFO will advise you when you're about to throw good money after bad. If that happens, it might be simpler, quicker, and cheaper to pull the plug and walk away.
Psst, can we let you into a little secret? M&A is not a Field Of Dreams scenario. Once the deal is signed, you will have to grind again—twofold—as you bring two companies together.
However, with the right reasons, timing, and financial process, the transaction will pay dividends.
Speak with a Kordis fractional CFO today if you are considering a merger or acquisition.