How the Addition of a Third-Party Firm Reduces the Pre and Post Close Burden on an Organization
As a business leader, you have spent years or even decades building your organization. You overcame numerous obstacles in the process to raise multiple rounds of funding, amass a loyal client base, and grow revenue and earnings. Starting and developing a successful business today is tough, but exiting can be even more challenging.
Why is M&A so difficult?
When preparing for a transaction, you, as a seller, should consider the upcoming risks, as a large part of the process is unknown, even to the most experienced business owners. A Deloitte Consulting study reported that even with extensive planning, 63% of M&A transactions cited either a difficult transition or an unexpected challenges as the greatest reason for failure.
In the sell-side of a deal, an owner needs to account for the goals of the purchasing and acquiring party – acknowledging the potential financial, technical, and operational changes in a transaction. Thus, prior to the deal, an organization should know where it fits into the quadrant to the right. How M&A ready is your company? How able are you to run operations during a sale process? Understanding all the aspects of your organization helps, but it does not guarantee a smooth process. Risks still exist without a seller’s knowledge.
Is My Organization M&A Ready?
Fortunately, or unfortunately, preparation and planning are key. A seller will have many questions to answer for his or her organization, such as: Do you have the sales team in place to support your growth? Do you have a budget and the ability to manage towards it? Are your accounting systems well designed and implemented? Executives will face a checklist of data requests in the hundreds, so owners who are better equipped to answer effectively are more likely to (a) maximize deal value and (b) reduce stress in the process.
Experienced third-party assistance can enable a smooth integration for your organization. External partners, such as professional management consulting firms, offer sell-side due diligence for an improved deal value.. Not surprisingly, over 75% of companies that brought in an external partner to assist in a transaction achieved synergy within one year. They objectively assess the status of the sales, marketing, finance, accounting, tax, legal, HR, and IT departments. Third party firms are then better equipped at effectively conveying the right story to the right buyer. More prepared? Better deal value.
Is My Organization able to run operations during M&A effectively?
Along with preparation comes the execution. M&A is a distraction. It requires a commitment of excess time and energy, so executives should learn more about the risks first before potentially forfeiting financial rewards at the end. As such, many entrepreneurs flourish with company growth but lack the resources devoted to M&A. Other later stage companies face vast fixed resources and processes that struggle to adjust in a transaction.
A professional management consulting firm removes the distraction, providing business leaders the ability to focus on running their organizations. Over 85% of companies that created an Executive Steering Committee (ESC), Integrated Management Office (IMO), or Project Management Office (PMO) reported those bodies were valuable. They help establish goals; then execute the process alongside leadership. The firm manages all work streams and data flow, carries out an accounting and operational scrub, and performs due diligence. You can feel more comfortable that their deal value is not lost due to unforeseen challenges, as your organization is better suited for a smoother integration.
With the addition of an experienced professional management consulting firm in a sell-side transaction, you can receive a higher return versus executing on a deal alone. Your selling organization is more likely to maximize deal value through an internal department assessment and clean up, reduced strain on team resources, and thorough due diligence.
Learn more about 9Gauge’s Transaction Advisory Services practice and its Sell-Side Transaction Readiness services.