How to Navigate M&As as a Small Business or Start-up
As a small business or start-up, the prospect of undergoing a merger or acquisition can be daunting. However, this need not be the case and it can, in fact, bring positive results to your company.
It all begins with a small business owner or start-up entrepreneur who has nurtured the seed of their idea and grown it into a success through hard work, dedication and talent. What happens next is often an approach by a more distinguished ‘behemoth’ that goes on to consume the company and the attributes that once set it apart from the rest – this has, in many industries, become common practice.
In reality, SMEs and start-ups have a lot to gain from a merger or acquisition. The benefits can include growing the business with a similar or complementary company, making the most of an injection of cash, the acquisition of a third company, restructuring corporate debts in order to make the business more attractive to investors, and, ultimately, benefiting from economies of scale. If handled correctly, M&A can work well and many successful small businesses and start-ups have an M&A strategy written into their original business plan.
How to prepare for M&A
Small businesses or start-ups that are flourishing are clearly doing things right; however, keeping one eye on M&A, there are certain things you can do to not only increase your current profitability but also enhance your chances of appearing as attractive as possible to potential buyers:
- Record-keeping – be meticulous. It is what interested parties’ accountants will want to see and will examine in great detail. Also, thorough records will demonstrate your precision and systematic approach to business.
- Organisation – in the first flush of excitement of a new business, it is easy to get side-tracked by the day-to-day requirements of making it all work. Paperwork can, naturally, take a back seat. However, when investors are completing the necessary due diligence, messy records can be a hindrance and could even go as far as putting off potential purchasers.
- Credibility issues – it goes without saying that a business that fails to properly address customer complaints or employee grievances will not flourish, nor will it be targeted for any future merger or acquisition. Transparency is essential, as is dealing with issues as they arise, especially in these days of instant social media red flags. In this way, your business will nurture its credibility and become a far more attractive target.
- Timing – when a start-up needs to expand, whether in terms of larger offices/space or more personnel or new equipment, it could be the right time to consider M&A as an alternative to seeking traditional finance to support growth.
- The ‘bare necessities’ – it is essential to make a decision very early in the process on what your minimum requirements are from a full or partial sale. Issues include the future name of the company, the location and which staff are likely to make the successful move with you. Clearly, negotiations will ultimately determine what you’ll accept, but you must be clear in your own mind, first.
- Use your judgement – there’s no doubt that you’ll need professional assistance during the M&A process – lawyers and accountants will play a pivotal role in finalising a successful deal. The internal team you assemble to oversee the process should be fully aware of every step, it is also paramount that they liaise closely with your professional advisers to ensure the best possible outcome. However, your legal team cannot make the decisions for you and if, at any time, you feel a choice is being made against your better judgement, then it may be time to pause and reconsider.
A merger or acquisition for small businesses and start-ups can seem intimidating and bring with them the worry that you’ll lose your control and the sense of identity you’ve worked so hard to establish. However, it can also be a fantastic opportunity to expand and develop your business and see it flourish from humble beginnings.
With 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.