In the corporate world, every business merger or acquisition is never identical and poses its own set of challenges. However, the fundamental principle of every corporate merger and acquisition is always the same – two business enterprises with separate ownership and management want to unite as a single corporate enterprise to attain some specific financial and strategic goals. Business merger and acquisition expert Ryan Binkley of Generational Equity says that while two corporate merger or acquisition deals are never the same, there are certain fundamental components to execute a successful and lucrative corporate merger or acquisition deal
- Assemble a team
Each corporate enterprise wishing to merger or acquire a company must form of its own internal team comprising of representatives of various departments like finance, sales, marketing and operations. Such a company may also consider hiring competent and experienced accountants, lawyers, investment specialists and valuation experts. To successfully merger with another company or acquire a separate corporate enterprise, the Ryan Binkley Generational Equity team says there has to be cohesive thinking and regular communication among the members of the team.
- Initiate the target search
The team needs to decide whether to give the investment banker the task of finding and evaluating target companies. In such as case, the investment banker needs to have access to resources and provide counsel on negotiations with the proposed company and its valuation. The team may also decide to search for such a deal internally via the process of screening, networking or industry contacts.
- Develop a plan
The company needs to decide why it is opting for the merger or acquisition, what are of the objectives of such a merger or acquisition and whether the target company is internal. Moreover, how does the company intend to finance that deal and what are cost-savings and value-added efficiencies that will result from the deal. How does the company intent to choose the target company to buy? For this, the corporate enterprise needs to formulate a acquisition plan that includes that objectives, appropriate industry trends and method of generating flow. Such a plan should also have a benchmark for evaluating the target companies and a period for its completion.
- Pricing the deal
The team needs to decide that valuation method to adopt to find out how much the target company is actually worth. Generally, the market value is a convenient indicator of the value of a company. The other price factors that a company can consider are capitalization of earnings, discounted cash flow and net return of assets. If the team is considering the target company’s strategic value, it needs to evaluate the projected earnings stream under the proposed new ownership. The company should also consider assets like customer lists, brands, licenses and intellectual property. At the end of day, the company wants to buy the target enterprise at a reasonable price.
- Financing the merger or acquisition
As each merger or acquisition transaction is distinct, the options to finance the deal will vary from equity financing to of a combination debt and equity financing.
The other factors that the Ryan Binkley Generational Equity team says need to consider are the structure and complexity of the transaction, market conditions, the buyer’s cash position and terms of the purchase price.