In the financial press, articles about mergers and acquisitions in SMEs and large corporations are reported every day. While increasing revenue and getting exposure to new customers are typically the primary reasons for a deal but it is essential that any business wishing to get into the M&A game has a well-thought out strategy for ensuring success of the deal.

A successful M&A involves a complex procedure and the final outcome depends on many variables that must be taken into account by both parties. It is crucial to have a highly-qualified management team in place to ensure that your company is able to successfully navigate the M&A process and produce value. A trusted external consultant and accountants who can aid in this process can enhance the overall credibility of your M&A strategy.

The first step in the process is to perform an extensive financial health check for your business. This includes analyzing profit and loss statements and cash flow, and analyzing equity and debt, and determining if you have enough cash to pursue a M&A transaction. The financial health check will also highlight any discrepancies between your Management Accounts and Statutory filed accounts, which can cause confusion for buyers.

Another crucial aspect is to take into consideration the costs of integrating both companies. It can be physical costs such as the merging of offices, systems and employees, or it could be human capital costs such as calculating the costs of benefits and compensation programs. Getting human capital experts involved early in the process can allow you to properly assess these costs and build them into the price negotiations for your purchase.

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