Mergers and acquisitions are a time-consuming, complicated, and stressful business – and that is when things proceed smoothly. Any issues or hiccups within the process can add weeks or months to the timeframe, multiple layers of complexity, and add to the overall cost of the transaction.
That is why it is important to understand some of the more common issues that can develop – you can save yourself money, time, and headaches if you have the foresight to get ahead of potential problems before they arise.
There are different ways of measuring the value of a business, and they typically will give different results. Both the seller and the buyer need to be on the same page, using the same metrics, and measurements for the business valuation, or the difference may be insurmountable.
One of the most obvious points of contention between buyer and seller is the price. The buyer likely has an ideal target figure in mind, the seller wants a bargain, and somewhere in between is the actual fair market value for the business.
Both sides of the equation need to be prepared to cede ground on what their expectations are, otherwise the deal will simply not happen.
Second, to price is the overall structure of the deal. This will have tax implications for one or both parties, and thus will affect the total take-home price for the business (for the seller) or the complete financial outlay (for the buyer). In addition to the tax situation, assets and stock can also be treated differently in terms of liability when the deal is completed, and either party may be against aspects of different deal structures.
This issue mainly arises due to the seller not preparing thoroughly and properly. During the due diligence phase, the buyer requests (and expects) access to various documentation including contracts and financial reporting/projections. When they have to wait for specific reports or request them more than once, the buyer may begin to think that there is an issue that the buyer is trying to hide – at the very least they will become frustrated by poor communication.
All of these issues can be preemptively resolved with one silver bullet – a professional, experienced, and skilled mergers and acquisitions consultancy. They will be able to correctly set your expectations when it comes to the value of the business (and how much money should be changing hands in the deal), and they will be able to prepare you for all aspects of due diligence, including resolving any problems that might be found (contracts only signed by one party is a common one), and they will ensure that the deal is structured in such a way that both party’s interests are protected.