Mergers can be exciting to talk about but in many cases the new partners will be larger than the other partners. While this disparity in size could cause problems, it doesn’t have to. A lot of this comes down to the planning before the transaction and the execution afterward. With that in mind, here is a glimpse as to what happens when a small business is merged with a mid-sized business.
While ‘mergers of equals’ rarely work out, the most important factor in any successful merger is the ability for the leaders of both companies to work together. Not only will this help to ensure that the lines of communication remain open, but it will help ease any friction that may come up over time.
As such, relationships matter in a merger, so if you are negotiating a merger one of the first things you want to focus on is how you will be able to get along with your counterpart.
Bring on the Professionals
It is important that you bring on lawyers, accountants, and even board members early in the process. Doing so will give you the support you need to navigate the merger process, and this will ensure that even when the merger is with a larger company, you are able to protect your interests.
One potential concern for a small business is that they might not have direct access to experienced lawyers and accountants. For this reason, you should consider reaching out to a firm which specializes in mergers – especially with smaller companies. This is another important point to consider because merger experience with big business does not always translate too well.
What is the lesson here? Don’t be afraid to ask for help, just make sure the people you bring on board have experience in situations like what you are going through.
When it Comes to Customers, Set Clear Expectations
Another sticking point in any merger is how to handle the existing customers – including those currently in your sales pipeline. This can be tricky as there might be overlap in terms of product or service offerings or even in accounts.
As such, there needs to be clear expectations from everyone involved. This is the only way to ensure that customers will remain with the business even after the merger. Part of this discussion should include how to transition accounts to the new business and even who will take the lead post-merger.
In addition, a review of sales pipelines should be undertaken. This will not only help to identify active prospects but could point out potential challenges both firms may face in converting leads into sales.
Every Deal is Different
It doesn’t matter if you are an old hand when it comes to mergers or if this is your first deal, the simple fact is that every deal is different. This applies equally to mergers between companies of similar sizes or a merger between larger and smaller companies.
For this reason, you should come into merger negotiations with clear goals for your business, but an open mind as to how these goals will be achieved. Sure, you can learn lessons from previous transactions, but that is no guarantee.
When it comes to merging your small business with a mid-sized business remember that relationships matter, bring on the professionals, and take care of your customers. Following this game plan will not only help to bring the merger across the goal line but it will ensure that you are positioned for success going forward.
Are you considering a merger between your small business and a mid-sized company? Then contact the team at Beal Business Brokers and Advisors to learn how we have helped hundreds of clients in the same situation meet their goals.