Considering a Merger or Acquisition?


A company merger or acquisition can be a huge benefit to your own business. You could increase revenue, sales, products, and services in a very short amount of time that might take years otherwise. However, merging or acquiring a new company has significant risks that could potentiallycause your business to shut down. Before making the final decision, you should do a thorough evaluation of the pros and cons.

Is it Logical For Your Situation?

Whether you are thinking of doing a horizontal (acquiring a similar company) or a vertical (acquiring a company within your supply chain) acquisition, it could give your company the opportunity to grow in new geological and client areas more quickly. On the other hand, it is an expensive venture in both time and money.

To make sure your company won’t overreach itself financially or functionally, you must decide how much the merger or acquisition will cost and how you will be able to provide those funds. You should also objectively analyze how much time you and your managers will have to spend finalizing the merger and how that will impact your current business operations.

You should also plan a way to incorporate the two business cultures together. Clashing cultures is one of the main reasons mergers fail to be successful. It is wise to find a way to align the cultures before they are thrown in together.

Minimizing The Risks

If you think you’d like to move forward with a merger, performing a solid due diligence is the best way to mitigate the risks involved. You should validate any claims the seller made regarding the company’s finances, clients, employees, and any contracts they have. There should be special care analyzing the income statements, cash flow statements, and the balance sheet. You should also examine the clients and contracts because these will determine the future income that company will generate.

The last step is to objectively assess the company’s employees for their knowledge, strengths, and experience within the company. This could lead you to hiring some of them if they want to stay on after the merger.

Help Bringing it All Together

There is a lot of hard work and research that goes into a merger or acquisition. We can sit down with you and go through the pros and cons of this decision. If you want to move forward, we can also help perform a due diligence, financial analysis, and tax implication projections of your new venture.

CAPATA is a full-service accounting firm located in Laguna Niguel in southern California.