A merger or acquisition refers to the process of two companies joining together.
Growing your business through a merger or acquisition requires significant planning and preparation. Achieving a successful transaction starts with determining your business goals. You may be looking to:
Once your goals are determined, gather a team of experts to help you navigate through the process.
Once you have your team of advisors (including your accountant, lender, valuation expert, and legal representative), establish a timeline for the merger or acquisition. This team will help you determine if the transaction is financially feasible as they guide you through each phase of the process.
There are four phases for a successful merger or acquisition:
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There are a number of valuation methodologies that can be used to determine business value. The valuation is a critical component of the merger or acquisition process, as it is the primary driver for determining how much you should pay for the business you are acquiring. Our Certified Valuation Analysts have extensive experience to help you with an offer that aligns with the value of the business.
A cash flow analysis records how money flows into and out of a business, and helps you understand how much cash is available at any given time. Cash flow is an indicator of the financial health of the business. Having a lot of cash on hand isn’t a true indicator of profitability, just as having a lot of debt doesn’t mean the business isn’t financially strong.
The due diligence phase is critical and not the place to cut corners. You need to know as much about the company you are purchasing as possible. Due diligence will involve reviewing budgets, forecasts, accounting processes, earnings, and revenue. Before you make an offer on any business, you need to ensure you have done a full due diligence review. SVA’s team has assisted a variety of businesses with their merger or acquisition and we understand what to look for in the due diligence process.
An internal control audit will review the operational efficiency, regulatory compliance status, and financial integrity of a business. By using the internal control function, our experts will help you assess the risk management practices, control systems, and governance processes for the business you are acquiring. We provide a variety of reviews and assessments as well as full access to reliable, highly qualified staff in the audit field.
A quality of earnings analysis reviews the company’s revenue and expenses to ascertain the accuracy of historical earnings as well as the sustainability of future projections. This is a routine step in the due diligence process. The report will show how a company accumulates revenue and indicates if it is recurring or nonrecurring and cash or non-cash. SVA’s experts will recommend the type of analysis most appropriate for the business you are interested in acquiring.
Having a proper M&A strategy is an important factor in reducing your exposure to risk. Download this eGuide to establish yours.
This eGuide will help you understand the types of valuation methods, as well as understanding the marketability of your business.