How much do you know about business mergers? Are you sure you have the facts? Much of what people think they know about mergers is inaccurate. Test your knowledge with this article, where we’ve collected six common misconceptions about business mergers.
1. I Can Sell My Business Myself
It’s tempting for owners to try to handle the sale of their businesses. The problem is that you don’t know what you don’t know. And unless a business owner also runs a mergers and acquisitions firm, they have no idea how challenging selling a business can be.
Business owners often fall into a competence trap. They have several years or even decades of success in their field. So, they may feel that their experience and background give them the needed knowledge to tackle anything in business.
But mergers and acquisitions are unlike anything else in the business world. It’s not unusual for an M&A firm to receive a desperate call from business owners who tried unsuccessfully to sell their businesses but now realize they need outside help.
2. Only Large Companies Need a Mergers and Acquisition Advisor
It’s the massive mergers that get the spotlight on the evening news. After all, those deals are so big that they often threaten to tip the scales of fair play in a particular industry.
Those news stories make people assume that M&A advisors are only for big companies. But nothing could be further from the truth. Mid-sized businesses have nearly as many legal hurdles to clear as larger companies.
3. A Private Equity Firm Will Decimate My Business
People still equate M&A firms with those famous voracious businesses in the 1980s that gobbled up lesser companies, leaving employees jobless. It’s only natural that a business owner who cares for his employees and his company’s reputation would want the best for them moving forward.
That’s why it’s important to find an M&A whose business ethics align with your own. If you want your business to be in good hands, use an M&A expert who will understand and find potential buyers with a track record of caring for the companies they acquire.
4. My Company is Worth More Because of Its Potential Future Earnings
An appealing company to purchase is, of course, one that has a notable upside. But a potential buyer will always question why the present management hasn’t been able to capitalize on that potential.
Sometimes, the answer is obvious. But the answer isn’t clear in all instances.
In those situations, would-be buyers are extra cautious. If they can’t figure out why your business isn’t more successful, they’re unlikely to risk a purchase.
5. My Company Will Sell Overnight
Business owners often think that if their books are in order, they can sell their companies quickly. The reality is that a merger is extremely complicated. All parties have to adhere to strict regulatory procedures.
Doing things the right way takes time. For example, the amount of communication necessary between the M&A advisory team and the other parties is extensive.
6. Nothing is as Important as the Financial Aspect of the Deal
No one denies that money may be the primary driver of the majority of mergers. However, it shouldn’t be the sole or even primary consideration.
The first concern is whether the deal makes long-term sense for the companies involved. For example, can you merge the two business cultures successfully?