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Dos and don'ts for mid-level organisations entering into M&A transactions

Munira Rangwala
24th Apr 2017
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Over the last few decades, as the Indian corporate sector has evolved rapidly, a variety of domestic organisations have been researching the inorganic route to approach newer emerging international markets. Overseas organisations are also tapping Indian companies to broaden their base and boost their brand visibility. The need to collaborate operational efficiencies and leverage cross-border expertise with attention on new business models is largely driving companies to arrive into Merger and Acquisitions (M&A) deals across distinct business verticals. Here are a few do's and don'ts for mid-level organisations entering into M&A transactions.

Image : shutterstock

Image : shutterstock

Don't lose focus of the main business

It is imperative to maintain a high degree of focus on the primary business of the two merging organisations during the transition movement instead of throwing a lot of capital at the unification. Most mergers and acquisitions turn out to be failures in the long run because the primary businesses of the two organisations crumble before the integration is even complete. All but a small sector of both the merging companies should be aiming at meeting current revenue and profit goals, not on taking part in the integration.

Don't pay heed to unnecessary principles like ‘for each job, the best talent from either company will be selected’

This belief only slows down and disturbs the integration process in scale-driven mergers. Choosing the best teams from either company rather than the best individual employees will result in a faster and smoother integration, because it prevents mixed teams of people who've never worked together before.

Hurrying will do you no good

Speed is of essence only when the leaders of both the organisations have paved a well-flagged racecourse. If not, speed doesn't take time to unravel into chaos. Investing in exhaustive and precise planning upfront always pays off in an ultimately rapid and polished integration.

Don't allow systems integration problems to command the timetable for integration

Integrating systems in no piece of cake. It takes a minimum of one or two years for a fruitful integration. Customers and competitors are not likely to give a newly established entity that much amount of time. Several facilities, processes, systems, and teams can and need to integrate a lot more rapidly for the M&A entity to be up and running.

Integration should come ahead of any basic efforts to better efficiency and usefulness of processes

Organisations that have tried to reinvent themselves during the merging process often get bogged down and hampered as staff of both the companies wrestle and try to adjust to new processes. It is always a better option to complete the integration first and then review the core processes later. Before entering the M&A, the management teams of both the companies need to have their work cut out for them to make the transition smoother.

Tailor the integration process according to the needs of the two companies involved in order to create shareholder value. Follow the best practices laid down by frequent acquirers and you're sure to have a successful transaction.

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