For most businesses, organic growth is the preferred approach. However, this can be a frustrating and often long process to get to the size where you are able to successfully match the best competitors in your industry sector. The alternative is to pursue mergers and acquisitions with similarly businesses to your own that ideally have a good culture fit. However, by undertaking mergers & acquisitions will require a business valuation, specialist skills and experience that normally will stretch the resources and management skills of the typical SME business owner.
Mergers & Acquisitions (M&A) are used by organisations for the purpose of expanding their operations and increasing their profitability. In the SME market sector most M&A activities occurs in a consensual setting where staff or owners from the target organisation help those from the purchaser in a due diligence process to establish an agreed business valuation to ensure that the deal is beneficial to both parties.
We have found over many years that M&A activities can add considerable shareholder value providing the program is researched with adequate due diligence and a thorough understanding of why it is happening. The major reasons for mergers and acquisitions include:
- Economies of scale: This refers to the fact that the combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to theoretically the same revenue stream, thus increasing profitability,
- Increased revenue/Increased Market Share: This reason assumes that the company will be acquiring a competitor that increases the price competitiveness and resources to improve the customer service experience leading to even faster growth in sales,
- Cross selling: For example, a manufacturer can acquire and sell complementary products,
- Synergy: Better use of complementary resources,
- Taxes: A profitable company can buy a loss maker to use the target’s tax write-offs, and
- Geographical or other diversification: This is designed to smooth the earnings results of a company, making the business more attractive to investors.
We offer a range of M&A experience gained over many years in Sydney, Melbourne and Brisbane across public and private organisations. Our experienced team will work with our partners to identify potential merger and acquisition opportunities for your organisation and assist with any business valuation requirements.
A) Company Valuations
These services include:
- Identification of suitable companies to compliment your organisation’s strategic objectives including realistic business valuation parameters for both your organisation and the target organisation.
B) Due Diligence
These services cover:
- Review and extend your current business strategy,
- Assistance with people skills assessments and identification of synergies to be derived from the M&A project,
- Working with specialist legal and accounting services partners to undertake professional due diligence leading to a business valuation and Sale or Merger Agreement with the target organisation
C) Negotiation Strategy
These services include:
- Preparation of documentation to commence negotiations leading to a Heads of Agreement,
- Depending upon the final funding arrangements assist in the raising of debt and/or equity capital, and
- Work with the Board and management team to deliver the agreed merger business plan.