Advantages of Mergers & Amalgamations
A merger is a great way to reduce competition and present your firm with monopoly power. With greater market share and less competition, the new firm can easily increase the prices for the consumers. The advantages of mergers and amalgamation are hard to ignore. Merger always involves two firms combining to form a bigger one and can occur as part of mutual agreement.
Perfect mergers between companies will be higher economies of larger scales, with bigger firms being more efficient in nature. There are more profits involved to enable more development and research. Even the struggling firms can get benefitted from the new management, which is here to take place. Willing to know more about the advantages that mergers and amalgamations have in store for you? If so, then you might want to get to our consulting team from SPD Consulting Pvt Ltd for some quite help. We have the most notable information in store for you right now.
Appraising and evaluating companies:
The procedure of analysing acquisitions will fall broadly right into three major stages, and those are planning, screen and search, and financial evaluation. The current acquisition planning process will start with reviewing of the corporate objectives and followed by product market strategies for multiple strategic based business units. The current acquiring firm must be here to define the potential directions designed for corporate growth and diversification in case of corporate weaknesses and strengths and assessment of company’s economic, political, social and technological environments. This current analysis produces set of acquisition criteria and objectives.
The specified criteria will include statements related to industrial parameters like regulation degree, projected market growing rate, ease of entry and even capital versus the labour intensity. Some of the other commonly appearing points in the acquisition list are market share, quality management, size, profitability and capital structure.
The screen and search procedure happens to be a systematic procedure for compiling lists of good acquisition prospects. The search mainly focuses on where to look for the candidates and how. The screen procedure will select few of the best ever candidates from thousands of possibilities as per the objectives and criteria as developed in current planning phase.
The final stage is the financial evaluation procedure, which is the main criterion to consider. A good analysis must enable the management to answer some major questions like maximum price to be paid for Target Company, principle risking areas, Earnings, cash flow and balance sheet implications associated with acquisition and also the finest way to finance any acquisition.
Focusing on the corporate self-evaluation:
The financial based evaluation procedure will involve self-evaluation by Acquiring Firm and evaluation of candidate for acquisition. Even though it is possible to conduct evaluation of Target Company without any kind of in-depth self-evaluation, it is one of the most advantageous structures. The detail and scope of corporate self-evaluation will vary as per the needs of every firm.
The world of corporate self-evaluation is primarily viewed as the major economic assessment of value, as created for the shareholders. The rules have been created by multiple strategic planning options, which promise potential benefits for all the major companies. In terms of acquisition market, the art of self-evaluation will take on special significance.
Designing and executing an acquisition strategy:
If you are looking forward to craft a perfect acquisition strategy, make sure to get to us for designing and executing the best acquisition strategy right now. This strategy happens to be a comprehensive plan, designed to identify and target acquisition approach that the current Program management will follow. The main goal in here is to manage the program risks and meet some of the program objectives.
Our acquisition strategy will guide the program execution across the entire program cycle and is always updated at some major milestones. You need one approved plan beforehand to get the task on road.
Creating a plan for merger or acquisition:
First of all, you need to check out the reasons to acquire a company. It can be because of finding new markets, industrial rolling-up strategy, getting advanced technology and more. Sometimes, you need to buy a company for creating market window strategy, getting new personnel, creating a product supplementation strategy and more. Consider the main resources you need and find out the worth of any business you are planning to buy. Develop a proper acquisition plan to get most out of enterprises while spending less. You need to make sure to focus on aspects of company, proven to be valuable to you and sharing up the offer around benefit.
Create an acquisition team:
Your team must have an executive to manage team for ensuring success of acquisition. This person will further report progress to board of directors. The CEO happens to be the best ever candidate for this position. It must also have an investment banker to handle finances and look into company’s stability that you are planning to acquire. It must have an acquisition lawyer to understand the transferring ownership rule, and a human resource expert to organize staff from new firm.
Then you have an IT specialist to merge technical infrastructure with that of new firm and a public relation officer to promoter merger to public. The main aim of a public relations officer is to inform your partners and business customers about new mergers. These people will actually provide important information on company and will determine what can become part of business and what mustn’t.
Your research and due diligence:
This procedure is known for first and second phase. The first phase is when you have to check public information about the said firm. For that, you need to check web pages, job listings, conference proceedings, blog entries, SEC filings and new stories. Then you have other data that you might use while drafting the contract. Make sure the company fits right into your plan and also checking for any issues that might de-value the firm. This research is mandatory to cover negotiations later.
Under the second phase, you have to check out the corporate facilities after contacting the firm. Meet the management and check in for the major elements of the firm. Get actual numbers information, success of company’s items, even behavior of staff and how that might improve the firm. You need to see if the corporate’s culture matches yours.
For covering these tasks, we will advise you on some common documents required. Those are summery or the business owner requirements, annual review of the owner’s benefits, three to five years of financial data and summary of major customers.
Furthermore, you need to prepare for some documents. The first one is non-disclosure agreement, where it treats all the confidential documents carefully and won’t get shared. It means that the information needs to be returned upon request. The next document is the letter of intent, where the document states that you intend to buy the company after NDA signup.
Another document is the Confidential Information Memorandum, where the document offers proper buyer with information for initial offer. Then you have Indication of Interest where you express an interest to make deal in vague but in a rather formal written offer. The last document is the Purchase Agreement, where you and the seller will formalize agreement in binding legal contract.
Make the initial offer:
Once you liked your search, it’s time for the first offer. Try making good first impression with some positive negotiations with a fair price. As you are planning to purchase a company, you have to make initial offer. A working merger is always your responsibility. So, keep this in mind while purchasing more than just a company. You are actually buying a brand, purchasing the goodwill of the company and its people. So, make sure to be flexible enough to make an offer rising between 75 and 90% of company’s entire worth.
Time to negotiate the terms:
You need to reach at one agreement which ends in happy merger. You have to be firm but not by undermining your success by being rather too harsh than what’s necessary. Never overpay and reach towards an agreement to benefit both parties. If things end up well, you will settle on price. But, it is more than just price as it is to understand why owners make counteroffer.
Learn why the firms are incentivizing sale. Check if something is wrong with the firm as that helps in presenting a clear idea of what you are purchasing. Once settled for a price, you need to work over soft issues. Figure out who will be staying with the firm and who you will have to let go. This part can be emotional. So, always try to be sensitive and keep as much talent in company as possible.
Create and sign a contract:
Contracts are not always the end of negotiation. You need to sign a contract when things turn out to be complicated. The deals won’t always end when you have a contract. So, having one lawyer to record the negotiation will make things a lot easier. A contract lawyer will find anything that you need to talk about.
Introducing probable buyers or sellers:
Businesses always have the right to choose acquisition as one major route to gain resources and competencies, which are currently not listed out. These might have various advantages, ranging right from immediate revenue increase to even improving long term financial outlook to make it easier for people to raise capital for another growing strategies. Expansion and diversity will also help a firm to weather periods of market slump or economic slump.
With merging two companies into one, you can easily increase the numbers of portable buyers and sellers. Other than your existing company’s buyers and sellers, entities the new company chooses will also visit your site. So, you can easily double up the present buyer or seller’s count by merging another company under your brand name.
Providing supervision for the timing of specific transactions:
In the current acquisition phase, the involvement of supervisory board will always increase. These meetings turn out to be rather frequent. For facilitating swift decision-making, it is vital to create a transaction committee, which can comprise of two members of management board and two from the supervisory board.
The main aim of transaction committee is to facilitate accelerate decision-making, which process crucial in acquisition phase. The committee, over here, primarily involves in the field of day to day basis and in preparation of deal. However, this committee won’t have any authority in decision making. The approval and decision making will always remain within the domain of the supervisory and management board.
Developing and formulating offering memorandums:
Also known as private placement memorandum, we, at SPD Consulting Pvt Ltd will be able to present you with services and help relating to offering memorandum. It is one tool, used to attract external investors, either targeting a known group specifically or just soliciting willing investors in general. Our document helps enabling the investor understand investment in detail so to help them assess interest in just participating in deal. We have the best investment banker to prepare an offering memorandum on behalf of all business owners under our belt.
Preparing Offering Memorandum
- The memorandum is divided under management biographies, objectives, risks, terms of investments, operational explanation of business, and comprehensive financial statements. In the field of investment finance, offering memorandum is one kind of detailed business plan.
- The main purpose is to highlight information as required by investor for understanding the business. It offers details on terms of engagement, potential risks related to business and detailed description of operations of business. The document will also include subscription agreement, which will act as contrast between two major parties, which are issuing company and investor.
- Investments will follow these guidelines formally and mostly required by securities regulators. A prospectus is quite similar to offering memorandum, but the former is for all the publicly traded issues while latter is associated with private placements.
- Growing a business requires an injection of capital, procured from investors. The offering memorandum proves to be a part of this entire investment procedure. For example, a company might decide to increase number of offices, which will need significant funds.
- The process starts with the firm deciding the amount they need for the said expansion. Then, it is time for a well-trained and experienced investment banker to draft offering memorandum, which must also comply with current process and security regulations and laws.
- It is then time for the company to choose who to issue the document with, based on their targeted investors. It is quite like the procedure of doing IPO but private placement other than company asking funds going public mainly uses offering memorandum.
Negotiation of sale agreements or terms of a purchase:
Join our team and let us guide you through the venture of sales and purchase agreement. It is one legal contract, taking place between two parties, to obligate transaction right between two parties, one is the buyer and another one is seller. SPAs are mainly used for covering real estate transactions but they are mostly found in all business areas. The agreement will finalize the conditions and terms of sale and it is mainly the culmination of negotiation taking place between the buying company and the selling one.
Before any transaction takes place, the seller and buyer negotiate the selling price of item and conditions for the said transactions in the process of merger, amalgamation. SPA is mainly a framework for covering the negotiation procedure. So, SPA generally covers larger purchases like frequent purchase over a period of time and piece of the real estate.
SPA also contains detailed information focusing on the buyer and seller. The agreement records any form of deposit as negotiations advance and parts of agreement, which have been met. The agreement will also record when the final sale is about to take place.
Tips to negotiate simple purchase agreement or even sales contract for regular transactions:
It is normal to use electronic signature for sales agreements or contracts for the habitual sales. The instruments which are forming part of this procedure and documentations will include tender, formal price quote, price quote, Proforma invoice and the purchase order. With the initial instruments, seller can extend a proposal to enter into contract with potential customer. Even though formal quote, tender and price quote is represents as equivalent documents, the Proforma invoice will have a different look, and will represent more formal, complete and precise element for better offer understanding. This proforma invoice will replicate terms and conditions during confirmation of the operation.
For this section, a purchase order is mainly a document which the buyer uses to confirm the proposal acceptance. It is also valid that the buyer confirm, state his acceptance of offer received by signing the PO and forwarding via email.
Tips to negotiate formal contracts:
Other than formal contracts, it is vital to consider set of clauses to protect the interest of parties. Along with recommendations mentioned below, we suggest that seller consult our legal counsel, to consider international based legal matters because of their complexity. Other than the proven clarification, international based sales contract must have the major clauses covered:
- Scope of contract
- Price and currency
- Products as covered under contract
- Parties involved
- Form and condition of delivery
- Payment form
- Intellectual property
- Contract’s duration
- Forms of resolution or termination of contract
- Non-compliance mainly due to force majeure
- Applicable laws, and
- Dispute resolution
Intermediating the compromise of compensation agreements with management teams:
A compromise agreement is a legal binding agreement, between employer and employee, in the process of merger, acquisition or amalgamation. It sets out terms and conditions, when the contract of employment terminates or dispute, is likely to resolve. Such terms will include provisions that employer will make necessary salary payment.
The primary goal of compromise agreement is mainly to draw a line under employment relationship, except in some circumstances, it might prevent some compensation claims against employer by employee in Employment Tribunal or the Court. It will be useful to deal with some other claims which the employer or employee might have, like those relation to breach of contract.
The issues as raised are quite complex and might involve other members of staff or even employees in other organizations. While compromise agreements are presented to give employees and employers higher protection in relation to future claims being made, there are some issues that cannot be compromised like employees’ rights to claim protective award for failure to consult along with collective redundancy and TUPE cases, or even rights under PIDA.
Negotiating agreements with capital sources for deal funding:
You can give us a call whenever planning to work with venture capital transactions. This term mainly refers to high risk and early stage of financing of the emerging and young growth companies. We are currently working with the professional venture capitalist, who is a well-trained financial expert, here to manage pool of venture funds for the investments in growing companies, on behalf of group of the passive investors.
No matter whatever the particular stage of development your company is right in, the primary products or services you are dealing with, the venture capital firms will consider multiple major variables to analyse business plan before committing capital to projects. Just to show that the firm qualities for venture capital, our management team will prepare a set of answers to cover following questions on management team, product and services, targeted markets, and ROI.
After receiving the financing proposal, the company needs to assemble negotiation team. Structuring and negotiating venture-capital transactions will revolve around need balance right between founders concerns and concerns of venture capitalist. You can give us the job option to cover on your behalf.
Merger Advantage – The final point:
Whether you want to focus on negotiating agreements with capital sources or planning to negotiate the sale agreement, we are here to cover and address your needs well towards Merger, Amalgamation or Acquisition. Make sure to give us a call or email our consultancy, and leave the rest on experts. We are associated with such companies for a long time and never gave anyone a chance to complaint. Join us right away to understand the advantages of mergers and amalgamations as always.