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SIDEBAR: Is Your Company Ready for a Merger or an Acquisition?

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SIDEBAR: Is Your Company Ready for a Merger or an Acquisition?

Read yesterday’s feature, The Race to Merge and Acquire Is On, which takes a look at why both financial and strategic buyers are actively looking for viable companies to acquire.

 

As an investment bank that provides M&A services to companies throughout the Americas and Europe, P&M Corporate Finance (PMCF) also offers “readiness reviews” for its clients. Here are five commonly observed considerations it tells clients to focus on:

  1. Make sure your supplier contracts are memorialized. “We see instances of ‘handshake’ exclusivity or service agreements,” says Joe Wagner, managing director. The problem is that no one wants to pay for a handshake, nor do they want to guess at what does or doesn’t come with the distributorship that they’re buying. “They’ll pay when there’s validity to the arrangement and the value that you’re providing,” says Wagner.
  2. Know your company’s growth strategy. Flying by the seat of one’s pants and hoping that growth comes as a result is a failed strategy for a company that’s looking to be acquired. A better approach is to drill down, and both identify and quantify your company’s growth strategy—something all companies should be doing, regardless of whether they’re up for sale or not. For electrical distributors, that growth story could be about geographic expansion, it could involve selling more to existing customers, or it could focus on developing a more robust online selling strategy. “Whatever it is, develop that strategy and then come up with the strategies and related tactics to execute on it,” says Wagner. “That goes a long way in getting a business ready for sale and also just running a business in general, even if you don’t sell.”
  3. Up your distributorship’s internal controls. PMCF advises companies with a wide range of internal controls and procedures. If your business has weak internal controls, on the surface, you may be showing healthy profit margins. But, after peeling the layers back, gaps can be exposed. “A company may not be ready to transact at all,” says Wagner, who tells distributors to pay particularly close attention to business processes, procedures, IT systems, and KPI tracking before launching a transaction process.
  4. Get your internal team in place. Distribution is a people business that relies on solid relationships, expertise, and industry acumen to run smoothly. Knowing this, Wagner says companies should make sure they have solid management teams in place—and the right seats filled within the organization—before launching a process to sell the business.
  5. Do it right the first time. Once the decision to transact has been made, you’ll want an investment banker, an M&A attorney, and a good accountant/tax professional on your side too. “Get your whole team ready because these transactions can be very complex matters,” says Wagner. “If you’re going to do it, you want to do it right the first time.”

 

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Bridget McCrea  is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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