How to Navigate a Business Acquisition

An acquisition of one business by another can be a complex process. The buying party has a choice: it can either merge the new acquisition into the existing business, or allow it to persist as a nominally separate entity. In cases where the brand of the purchase holds value, the latter option might be preferred. In cases where the technical resources and physical assets are what matters, bringing everything under the same name might be preferable.

Whatever the nature of the acquisition, it's vital that the right technical expertise is involved. Specialised and experienced corporate lawyers will help to ensure that the deal satisfies all of the legal requirements necessary, and that it will stand up if later challenged in court. The more complex and consequential the merger, the greater the need for legal expertise.

What's in it for your clients?

Given this potential for stress, it's worth pondering why we might pursue an acquisition in the first place. How will the acquisition help to further the objectives of your business? Do you anticipate any disruption?

Once you've set out coherent answers to these, and other, questions, you can think about making an announcement. Your team should be brought on board, and so too should your customers. By doing this early in the process, you can avoid alienating customers by surprising them later on. They might have concerns about the direction of the company, or the quality of the products they buy, or the technical support they'll receive. The best way to assuage these concerns is by meeting them proactively.

Merger

If the products sold by both companies are similar, or complement one another, then a merger might be the preferred strategy. For example, a car manufacturer might buy a small manufacturer of specialised aftermarket exhausts, and then use the expertise of that smaller company to improve their products, at the expense of rivals.

A merger tends to result in greater efficiency and the elimination of redundant components. Communication tends to improve within the new, larger entity. On the other hand, if the two companies are not well matched, the result might be a cumbersome new entity that isn't able to communicate well internally.

Separate entities

On the other hand, the two businesses might continue as niche entities. A manufacturer might acquire another in order to access a new part of the market. If your company is known for producing cheap goods, then buying a premium manufacturer might allow you to access new markets.

This will allow you to retain the qualities of the existing companies, and allow them to retain their focus on their respective niches. On the other hand, the focus of the two companies might be divided, and they might end up working for crossed purposes.

Integration challenges

Whichever kind of acquisition you pursue, it can be a challenge to get two separate organisations and cultures to mesh with one another. In some cases, you'll be forced to make talented people redundant. The biggest driver of stress at this time is uncertainty. By communicating your intentions throughout the process, you'll be able to minimise this problem and let everyone start to decide how to make their way forward.

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