Merger and acquisition (M&A) tips from an MSP that’s been there, done that and learned a few lessons along the way.
Recently, at the 2017 Ingram Micro ONE event, MSP F12.net shared tips with audience members regarding the merger and acquisition process. The fact that F12 has completed four acquisitions over the past two years, including Insite Computer Group (2015), XCEL Professional Services Ltd. (2016), Protocol Technologies (2017) and OnDeck Systems Inc. (2017), makes it a qualified candidate to speak on this process.
To make the topic more lively and relatable to the audience, three members from the company took on the role of buyer (Alex Webb, the company’s CEO), seller (Doron Kaminski, GM of the East Region) and integrator (Leanne Yeatman, Director of Administration). Here are the key takeaways, segmented by role:
- Trust. Very early in an M&A conversation with a potential buyer, the seller needs to establish trust that the deal is going to be fair and the process won’t be any more complicated or painful than necessary.
- Be prepared for change. After a few months into the process, the seller may start feeling uncomfortable, wondering whether they’ll be able to maintain their current lifestyle post-merger and questioning whether they’re getting the right value for their business. In anticipation of these thoughts, it may be helpful to meet with a business appraisal professional to perform a business valuation of your company.
- Deal with issues. M&A conversations can last several months or more and sellers need to prepare for issues such as dealing with employees’ reactions (e.g., fear of loss of employment), legal questions that arise from the buyer’s attorneys and delays.
- Reduce emotion. When legal reps start asking sellers questions about sensitive areas of their business (e.g., profits and losses, specific business decisions), it’s easy for a seller to misinterpret the questions as personal attacks on character as opposed to what they really are, which is part of the due diligence process.
- M&As are hard, but worth it. Oftentimes a buyer will need buy-in from one or more business partners, which can make it difficult to get everyone on the same page to move forward toward closing the deal. The virtue of patience is a must-have here.
- Know what you’re buying. There’s a lot of due diligence required to complete an M&A, covering topics and departments such as finance, tax, corporate, HR, sales, technology and legal. Taking the extra time to investigate each area thoroughly can mitigate the chances of buyer’s remorse in the future.
- M&As don’t fix poor performance. Sometimes a business owner is only interested in selling their company because sales and profits are down, and it seems like the only positive alternative. Be very wary of these situations. It’s often a red flag that you could be acquiring a whole lot of problems (financial as well as legal) if you don’t fully understand why the company’s floundering and/or what’s motivating the sale.
- Focus on goals, not timing. As the coordinator of an M&A, you have the challenge of dealing with obstacles that emerge from either side of the deal. Each question/objection will likely lead to delays, which should be expected.
- Invite brainstorming. If the M&A hits a snag and doesn’t seem to be able to move forward, the best thing to do is get key stakeholders from both sides together, present the facts and invite ideas from all parties as to how things can move forward.
- Business as usual. A number of distractions will present themselves throughout the M&A process—especially with regard to emotions from the buyer, seller or key stakeholders on either side of the deal. The integrator needs to maintain focus throughout and help both sides stay focused on the main goal.
M&A doesn’t happen overnight. Take the time to assess and map out the matters at hand so you can make informed decisions that are best for the business, no matter which hat you’re wearing in the process.