Common merger and acquisition errors – how to help your clients to avoid the pitfalls

Selling or merging a business can be a daunting process, which requires careful fiscal as well as legal considerations.

Taking this next step can be an exciting prospect with the potential for high levels of success, but your clients may encounter difficulties along the way if they are not fully prepared.

If your client is considering selling, merging, or acquiring a new enterprise, they should bear in mind the top five errors businesses make, to ensure a positive outcome.

Having a lack of information about the current condition of the sector

Having a good level of understanding of the sector a business operates in, as well as its market competitors, is a must. Many agreements fail due to a lack of market awareness and changes in a particular industry in relation to latest economic pressures and this can affect the sale price of the business.

In every industry, advancements and developments are continually being made which can influence the sale of your client’s business.

It is important for your clients to remain realistic about the value of their business and to work alongside financial specialists who can help them to maximise the value of their assets pre-sale.

Having incomplete or onerous contracts

To successfully complete a merger or acquisition, due diligence must be completed. This process comes to a halt if your client fails to provide complete records. A thorough audit of a potential investment will verify the accuracy of the seller’s information and assess its value, taking into account the latest market conditions.

Part of this process will, of course, involve a review of a firm’s existing contracts and agreements, as well as its general terms and conditions.

Not having a clear post-merger plan

Often, your client may be so focused on the process of the merger or acquisition that they lose sight of the long-term plan for the business.

It is vital to maintain a long-term commercial vision to ensure success. Whilst this may appear to be an obvious consideration, it is unfortunately where many businesses fail.

This is perhaps one of the most significant errors often made and one where your clients will benefit from not only speaking to you as their legal advisor but also to a specialist accountant with experience in mergers & acquisitions.

Failing to communicate the vision and strategic fit

It is important to consider whether your client’s business is compatible with the company they plan to merge with.

This should be considered before and during the process, ensuring open discourse between parties regarding the future of both entities. Regular communication between buyer and seller is crucial in the merger process and should be prioritised throughout the transition into the newly formed company.

We can support you and your clients through the buying, selling or merger & acquisition process and also advise on the most tax efficient method of extracting assets where a director is planning to exit the business.

For further information on the specialist support we can offer you and your clients, please contact us today.