With more than 50% of marriages failing, As an Accountant I’d rather marry two companies via a corporate merger or an acquisition. Combining and becoming more than the sum of their parts, they succeed more often. Many factors go into a successful merger, including senior teams that can work well together, shared values and an understanding of each other’s business culture. Employees, stock owners and other stakeholders also need reassurance along the way as the companies enter unknown territory.
Top 5 Best Mergers and Acquisitions in the 21st Century
WellPoint and Anthem
Back in 2004, Anthem Inc. of Indianapolis and the Thousand Oaks, California-based WellPoint Inc. underwent a $16 billion merger. For 10 years, the two used the Wellpoint name, but have recently switched to Anthem. Both companies had a long history of successfully acquiring smaller companies. The giant’s cost-saving strategies have endeared the company to its stockholders.
Disney & Pixar
Many millions of movie-goers and toy lovers have benefited from the Disney/Pixar merger. Children and adults alike love Finding Nemo, Toy Story and WALL-E. Frozen is one of the highest-grossing movies of all time. Between Pixar’s moviemaking talent and Disney’s marketing expertise, these two companies are one winning combination.
Sirius & XM radio
Have you noticed that most new cars arrive on the lot with SiriusXM pre-installed? Ever since the rivals joined forces in 2008, they managed to override the FCC’s monopoly clause and soar to great audio and financial success.
PepsiCo and Quaker Oats
With an obesity epidemic in full swing, what’s a company most known for its sugary drinks to do? Merge with a company whose lead product lowers cholesterol and is practically synonymous with wholesome goodness. In 2001, PepsiCo bought Quaker for $13.6 billion. Since then, there’s no stopping this food and drink industry powerhouse, which knows how to light up the snack aisles with its marketing genius.
JP Morgan and Chase
Dating back to 1799 and 1871 respectively, Chase and JP Morgan have more than 300 years of combined banking expertise. In that time, the two have folded in more than 1000 regional and national financial institutions. The two banking powers merged in 2000, after already incorporating Manufacturers Hanover and First Chicago Corp into the fold. Since then, the company continues its acquisitions, including Bank One in 2004 and Bear Stearns Companies, Inc. in 2008.
If you are selling your company, or even just thinking about it, what is most likely of paramount importance to you is finding a qualified buyer who is a great fit for your practice while receiving maximum value and maximum cash at closing. You are likely thinking: “Right. Well tell me something I don’t already know.”
Let’s do some critical thinking using the Socratic method: Just how do you foresee finding this buyer and getting that maximum market value and cash? Will only one offer give you enough leverage in the negotiation or do you need a pool of qualified buyers and multiple offers? How much mergers and acquisitions experience do you have? Do you have any experience structuring an M&A deal? Do you have a large stable of SBA and conventional lenders who have a history of approving these sales with a high price and cash at closing amount? Do you have the ability to maintain confidentiality for yourself in the early stages of the process? Will customer attrition be minimized by an individual with comparable experience to yours or a small, medium, or larger firm that is growing via acquisition?
Here are our top reasons for hiring a specialty broker. Every reason is a factor that will play a part in determining if you find the right buyer and whether your company’s value and cash at closing is maximized – or whether you will sell yourself short.
Time and Energy
If you are like most business owners your time is a finite resource. As far as demands on your time goes, you should continue working to get work out the door, retain your current customers, manage your staff, while keeping current with changes in state and federal regulations, etc.
Do you really have the time and the energy that it takes to find the right buyers and then market and promote your business, vet buyers, negotiate the terms of an LOI and the final sale? Most (likely 99.9%) business owners do not have the time or resources to do even a mediocre job of all of the tasks necessary to put the right buyer in place and derive maximum value and cash at closing.
Identifying the right buyer and bringing competition to the table
This is clearly a case when the amount effort put into the endeavor is directly correlated to the end result. Signing with a business broker who passively lists your company and the asking price on a website will produce a minimal yield of qualified buyers. A passive broker is unfortunately a strategy that can often lead to the wrong buyer, as well as the wrong price.
Maintaining Absolute Confidentiality
The business owner who approaches selling a company as a DIY project is most often headed toward disappointment on a grand scale. Confidentiality is often broken by a DIY seller who discusses a potential sale with a buyer who later indicates that they are unwilling to sign a confidentiality agreement. Breaches of confidentiality can occur in the very first phone call or in that courteous reply to an inquiry. This is because without a broker, the seller identifies himself/herself to all potential buyers at some point before any confidentiality agreement is signed.
An Accountant and a specialty broker are your shield that removes your massive exposure to this very real risk. Buyers receive no information related to a company for sale until each buyer has signed the standard nondisclosure agreement. The team will thoroughly redact the information we send to our buyers to eliminate any identifying information. A large group of buyers will be identified with all, but the best weeded out, one-by-one, until the team has a short list of buyers who meet all qualifying criteria and who are willing to pay top dollar. The seller is in the driver’s seat and gives us authorization as to which of the buyers on the short list he or she would like to meet. Any buyer not approved for a meeting by the seller will never receive the seller’s name.
DYI sellers tend to kill their own deals and rarely get top dollar.
Negotiating and Structuring the Deal
The ability to “walk the fence” between the psychological and analytical sides of a deal is a skill and also a gift. Not everyone is cut out to be a negotiator that understands not simply the analytics of a deal but the psychology of what keeps the seller and the buyer motivated and moving forward to close. We have seen sellers kill a deal by simply standing fast with the analytical side of a deal.
Exceptional ability to negotiate and structure the deal is paramount to achieving a structure that fulfills the seller’s needs while reducing the seller’s tax liability. If not structured properly a seller can lose as much 30 points in a deal to taxes alone. If you don’t believe this, call us.