M&A MERGERS AND ACQUISITIONS PITFALLS
The summary below – is our mergers and acquisitions M&A Pitfalls list – and will give some insights into possible obstacles and complications that may occur in business acquisitions. Perhaps we should describe the process as a real "minefield".
However, you do not have to make these mistakes since you have the option to enable Consultdustry as your business broker, a specialist in M&A in Asia!
List of mergers and acquisitions (M&A) pitfalls
• Not appointing an expert adviser in mergers and acquisitions (M&A) process
due to insufficient reality and distance, lack of knowledge and experience, often (immediate) connectedness and conflicting interests, the legal, financial and commercial aspects and business interests will be improperly represented and this will have direct a negative impact in the negotiation strategy and scope.
• No exclusivity
no confidentiality and no secrecy gives rise to rumours in the mergers and acquisitions (M&A) market and actual results in damage to selling price and process control.
• Emotion and not taking a distance
too strong, emotional connected with the company would endanger the risk of complications due to unrealistic representations in the sales process and / or the negotiations and the demands or expectations regarding the business continuation.
• Falter and stagnating enterprise
normal business is neglected and normal business is suffering under the takeover process, causing turmoil, loss of reputation, disturbed relations and loss of profit.
• Inadequate process control of mergers and acquisitions (M&A) process
Inadequate management and communication of the seller and / or buyer also gives uncertainty and unrest in the company and can result in trust of with relations.
• Too low sales valuation
such a statement is often aimed at and / or tempted into an (unnecessarily) fast transaction, which will be regretted afterwards.
• Too high sales valuation
an actual incompetent overestimation will never lead to a transaction and a possible adjustment in a reduced transaction amount will also give a disappointed feeling in addition to complications and unnecessary loss of time.
• Limited search and selection process in mergers and acquisitions (M&A)
an obvious and / or nominated candidate does not yet have to be the best party from the viewpoint of the best transaction price and business continuity.
• Blind and weak spots
should be prevented and limited as these will be quoted by negotiating parties to reduce the price.
• Uncleaned balance sheets
in addition to the infringement of private affairs, entangling private and corporate assets leads to unnecessary complications in argumentation about the process and pricing.
• Too open and too eager in mergers and acquisitions (M&A) process
prudence and restraint is the motto, otherwise the process will be disadvantaged and price reduction will also occur.
• Deploy other advisors
limit these and if necessary, give these delineated orders and let the deployment and costs fall under the responsibility of the leading (mergers and acquisitions) advisor.
• Lack of mandate in negotiations
negotiating is an art and is a game with rules based on strategy and tactics, timing, recognizing the possibilities and the impossibilities, connecting conditions and above all leaded by a competent, ultimately responsible and coordinating advisor.
• Early Letter of Intent
do not start too early as after signing, the mutual competition of other interested parties cease to exist, and only the signing takeover candidate will be left and this must therefore also be binding.
• Incomplete Letter of Intent
if conditions, price and further process progress are insufficiently defined and agreed, this may lead to the reopening of apparently done business with the aim of achieving a negative adjustment of conditions.
• Due diligence
framing the process to keep it verifiable, since every deviation has an adverse effect on both the final price and may lead to the dissolution of the letter of intent.
(partially) deferred payment for future profit is in fact not a realistic proposal as it is risky and the influence of the selling party is extremely limited.
So many mergers and acquisitions (M&A) fail!
Unsuccessful mergers and acquisitions are very common.
Over 2/3 (!) of business takeovers are experienced as unsuccessful, with a detrimental effect on business continuity and returns, which is caused by;
- little interrelationship (markets, product, processes, technology)
- diffuse acquisition criteria
- overestimation of synergistic effect
- too high selling price (often ill-considered and / or hasty purchase / sale)
- weak due diligence (usually from a cost-saving point of view)
- large differences in entrepreneurial culture
- departure existing management and key staff (role model)
- departure of customers
- unclear plan post-takeover and integration