R. Shawn McBride recently spoke about what you need to do before a merger.
Folks, Shawn here with you, talking today about preparing your company for a merger or acquisition. Now, most of my comments today are going to be applicable to the sell-side, which is somebody selling their business to somebody else. But, a lot of the stuff is also going to apply on the buy-side, if you’re the buyer. So, if you’re preparing to sell your company to somebody else, what do you need to be doing?
#1 You need to have systems and processes. You need to have your business working well and you need clean books and records. You really need to know who you are, you need to be documenting how you’re doing things, and processes. One thing that often happens in mergers is you have turnover; you’re going to have employees leave when they start hearing about the merger or concerned about the acquisition. So you want to be able to keep the processes moving forward. You’re also going to be involved in a due diligence process, so that buyer is going to look at your books and records.
#2 Another thing you want to have when you’re doing a merger, is you want to be ready for the due diligence process. This means doing pre-due diligence. Sometimes with my clients, we sit down and we do a due diligence process before the due diligence process. Due diligence is usually very extensive, but the forms look a lot alike. They may be in a different order, but generally, when an acquirer is buying a company, they’re looking for all the records. So they want to know everything going on there and they want to make sure everything was done in a compliant fashion. So you can anticipate that. Now is a great time to do your housekeeping beforehand.
#3 You want to start cleaning up your financials. You want to start getting your financial house in order so that things are as clean as possible. There’s going to be a multiplier effect. The lower your expenses and the higher your income. They usually get multiplied by some multiples applicable to your industry, so you can really leverage by getting your income statement very clean prior to a merger.
So one of the keys here, and I think this crosses across everything I just said, is you want to have your house in order before your merger. You want to start putting that game plan in place. So, if you’re the kind of person that thinks you might be selling your company, start planning now. It’s never too early and you definitely want to be doing strong planning three to five years before the merger happens. Do not wait until one year before the merger because you’re going to lose a lot of opportunities.
The time to be starting a plan for the merger is really three to five years in advance. You can put some expenses in, build systems and processes, update your books and records at that point, get all those costs out there before that multiplier kicks in because usually that multiplier’s applied to the current earnings. So get all the housekeeping done, get all those expenses done before you get into the merger situation, and then, you’re going to get a much higher offer.
How can I help you? Give me thumbs up or thumbs down on these videos. Maybe you’re checking it out on YouTube at McBride for Business, if you’re not a subscriber, subscribe over there. Maybe you’re over at R. Shawn McBride Fans and Audiences on Facebook, check us out there, become a part of our tribe, join our group. I really want to thank you for doing the hard work to improve your business. It’s not easy to think about these things. There is a lot of hard work and most people aren’t as proactive as the people who’re thinking ahead to the merger. So I applaud you for anticipating these issues and getting ahead of them.
Let me know how I can help you, check me out at yourbusinessspeaker.com and McBride for Business, let me know how I can help your organization. Maybe I can come out and do a keynote, do some coaching or training, or somehow help you. I’d love to be part of your team, love to help you and your employees do more, that’s what it’s all about. I’m here for you, send me your questions, let me know how I can help you. I’m R. Shawn McBride, I’m signing off, but I will be talking with you again very soon.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer melissa ricquier.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.