Merger and Acquisition (M&A) Assistance

U.S. companies are engaging in mergers and acquisitions with a frenzy that hasn't been seen since the economic boom of the late 1990s. While the promise of growth and economic gain is real, analysts warn that without careful planning and analysis, many mergers and acquisitions can ultimately fail to live up to their initial promise and could even cause more harm than good. But while M&A activity is up to a level not seen since 1999 and 2000, history has shown that there is no shortage of M&A casualties.

The key to a successful merger or acquisition is drafting an M&A roadmap that will:

• Help you target the right company to merge with or acquire. 
• Provide guidance on drafting an airtight agreement once the right company has been identified. 
• Outline the specific steps necessary to coordinate a well-planned implementation of the merger or acquisition.

M&As defined

Although the terms "merger" and "acquisition" are often used together, there is a difference. A merger is typically defined as the combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. This decision is usually mutual between both firms. An acquisition is when one company purchases a majority interest in the acquired company. Acquisitions can either be friendly or unfriendly.

While either option will increase your company's holdings, most experts agree it's what comes before and after the contract has been signed that will determine your long-term failure or success. The following steps help outline how to best plan, execute and implement a successful merger or acquisition.

Evaluate your goals

There are many different reasons to merge with or acquire another company. Many companies turn to mergers or acquisitions as a way to answer the constant pressure from stockholders and stakeholders to show marked, continuous growth. But if growing for size is your only criteria, experts warn, your merger or acquisition may be doomed to fail. Mergers for the sake of growth will ultimately hurt your company in the long run unless the transaction also helps achieve one or more strategic business goals and builds on or complements the company's own core competencies.

Such goals might include any of the following:

• Product extension. Identifying a target company that offers a slightly different —but related — product so you can extend your market presence. 
• Geographic extension. Identifying a target company in the same industry that serves a geographic area that your company does not currently reach. 
• Increased customer base. Finding a target company that could increase or broaden your customer base. 
• Acquiring key management or other personnel. Identifying a target company with strong management talent to help your team succeed. 
• New distribution channels. Finding a target company with sophisticated marketing or supply chain operations in place so you can better or more economically distribute your goods or services.

Locate a target company

The next step is to find a company that is both attainable and can provide the synergies for your own company. There are many resources to help you do this, including consulting firms, online databases, investment bankers and word of mouth.

M&A professionals warn the most common pitfall at this stage of the process is not taking into account a prospective company's culture. A company may have all the criteria you think your company requires to expand and be successful, but if the two companies' cultures are substantially different, melding them into a successful single company may be an unreasonable expectation, or may require additional analysis and planning to ensure a smooth transition.

Analyze the structure of the deal

Once you've determined that the target is worth pursuing, the next step is to analyze the deal's structure. Buyers and sellers often have conflicting tax goals. Experienced tax professionals know the ropes and can work to draw the two perspectives together to close the deal.

Perform adequate due diligence

Once you've found a company you believe meets your criteria for a merger or acquisition, the next step is for both parties to sign a non-binding letter of intent and proceed with the business of due diligence. While this is the step that yields the most crucial information about the target company, time constraints and market frenzy can sometimes cause the buyers to rush through the process.

Make sure you have a qualified team to help you through this crucial step. The team should help you finalize your decision about whether to continue pursuing this company, and give you a clear idea about the company's overall value. During the due-diligence process you'll want to learn the following about the prospective company:

• State of current and historical financials 
• Current liquidity
• Quality of assets 
• Key risks and weaknesses of the target company's operations and technology
• Overview of accounting policies 
• Tax structure options
• HR programs and strategies 
• Litigation risks

When considering a merger, recapitalization, or a sale which is partially seller financed, it is essential that that you perform extensive due diligence beforehand. Due diligence should occur in all areas, from financial, legal, tax, environmental and operational. For most owners, it's the most important decision of their lives, so you really need to leave no stone unturned.

Make the deal and implement the changes

Don't be fooled into thinking that the completion of due diligence and the signing of the final contracts mean the merger or acquisition is complete. On the contrary, there's still a lot of critical work to be done. The task of turning two companies into one is a daunting one, but careful planning and forethought can help ease the transition.

How your company deals with merger issues such as communication, employee retention and/or layoffs, customer notification and reassurance, consolidation of staff and integration of systems will play a huge role in determining the overall success or failure of the merger or acquisition.

Don't wait until the deal is finalized to think about these issues. Assemble a team of stakeholders and experts to analyze the challenges and risks of integrating the two companies and have an action plan in place long before the official merger date.

By following these steps, you will be further along in ensuring a successful merger or acquisition.

How Freed Maxick & Battagtlia, CPAs Can Help

Few business activities are more complex or risky than making an acquisition.  A thorough pre-acquisition review provides an opportunity to anticipate and negotiate critical business issues that many times emerge during the post-acquisition period.

Freed Maxick & Battaglia will review every aspect of your business an acquisition may affect.

• Product lines and markets
• Operations, including plant facilities, production, purchasing, inventories and costing
• Human resources
• Management styles and practices
• Research and development
• Engineering
• Legal Matters
• Financial considerations
• Operating results
• Balance sheet review
• Financing and capital structure
• Forecasts

How You Will Benefit

The benefits of a pre-acquisition review include providing you with:

• An assessment of the risk involved in a potential acquisition.
• An opportunity to assess the value for negotiation purposes
• Verification of selected assets
• Identification of unrecorded or contingent liabilities
• Information relevant to structuring and pricing the acquisition.

Our team is dedicated to providing service that is tailored to your company.  For us to be successful, you must be successful, and we strive to make that happen.  Our commitment to you is to help you achieve success by sharing our experience and knowledge with you.  As your company’s industry changes, we will be right there with you ensuring that every step you take will be what is best for your business.

Contact Our Merger & Acquisition (M&A) Team:

Each member of Freed Maxick & Battaglia's team of M&A Professionals possess a significant amount of experience.  Freed Maxick & Battaglia, CPAs is Western and Upstate New York's (NY) largest public accounting firm and a Top 100 firm in the U.S. Freed Maxick provides, audit, tax and consulting services to private and public (SEC) companies in Buffalo, Rochester, Syracuse and Albany New York. Affiliated with RSM McGladrey, the 5th largest accounting firm in the U.S., Freed Maxick has vast national and international resources to help your business expand nationally and internationally.

Contact us Via the Web or Toll Free: 1-800-777-4885

Robert Glaser	Ron Soluri	Paul Battaglia	Dave Barrett	Richard Wright