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Companies adopt several plans/strategies to reach out a larger audience and expand the business, such as introducing new products/services in the market, opening offices in different cities/countries of the world, running paid advertisements on WWW, radio, TV, etc. All these efforts take time to show the desired results. In today’s age of globalization and increasing competition in the business world, companies make massive leaps through mergers and acquisitions to expand their clout easily and quickly. Nevertheless, the failure rate of mergers and acquisitions is quite high (between-70% -90%). Even those business organizations that show how to manage to survive after making M&A deals, fail to meet their targets miserably. Several factors are responsible for the failure of Mergers and Acquisitions, such as Flawed Intentions, Poor Communications, no guiding principles, lack of specific business rules, poor stakeholder outreach, overly aggressive targets, cultural disconnect, etc.
Are you also planning to strike an M&A deal? Want to repel the risk of potential failure? If yes, then you must adopt some strategies and tips mentioned here below: 1. Be Serious About Making A M&A Transaction Companies and firms should never take Mergers and acquisitions lightly. When you go for an M&A deal, you try to integrate two different companies for one corporate mission and bring together large groups of people with their own personalities, ambitions, behavioral traits, and ways of working in one organization. The level of complexity gets increased a lot if multiple branch offices, cross-border IT infrastructure, and financial regulation are included in the merger and acquisition process. So, you must have a clear strategy, effective project management and open communication between stakeholder groups to evaluate the deal from all angles and complete it successfully. Keep the process transparent. Involve all areas of management if you want to get success in an M&A deal and run a newly formed company successfully. 2. Don’t Join Hands With The Loss-Making Company While making an M&A transaction, entrepreneurs should not make haste. You should take the help of expert financial consultants, auditors, and tax lawyers to evaluate the target company from different angles, such as its total investment Vs income, tax returns, losses in business operations, cases pending against it, debt, etc. If a company is in huge debt, has lots of cases pending against it or has a bad reputation in the market, don’t deal with it. If you join hands with such companies, problems will start coming in your way. Choose a company for M&A transaction which is financially stable, free from serious legal cases, and has immense growth potential in the future. 3. Arrange Funds Or Look For Low-Interest Loans To complete M&A transactions, companies need to arrange the sufficient funds or take loans. If you take loans with higher interest rates, it would be very difficult for you to repay the loan on time and run the company successfully. The increasing burden of debt can negatively affect the development of your business. So, you should communicate with different financial organizations and take loans at the lowest possible interest rates. If this happens, you will be able to repay the loan amount with interest easily on the scheduled date and perform different business activities comfortably. 4. Uniform Work Culture And HR Policy Two different companies accomplish the same work differently. It means that there always remains a big difference between the work culture of two different companies. One of the most common reasons for the failure of M&A transactions is that the employees within the involved companies fail to adapt to change in their business operations, systems, and mission as a team. Telling a longtime employee to leave the job, accept a cut in salary or profile, use new technologies, etc, is always difficult. So, you must have uniform work and HR policy to address the concerns of employees and let them work in a friendly environment. When employees have a clear understanding of work culture, they work honestly and come up with greater output for meeting the goals set by the company. 5. Protect Your Business Legally While you make M&A transactions and don’t keep the interest of employees, shareholders, business partners in mind, you are likely to face litigations sooner or later. When companies join hands, several employees are dismissed from their jobs. They take legal actions against the company if their genuine interests are not addressed. Therefore, you should get involved in M&A transactions in consultation with mergers and acquisition lawyers. They will help you to perform the M&A transaction legally and protect it from sham litigations. It helps you to focus your attention on business activities and achieve the set business target easily. 6. Regular Evaluation of the Company’s Perform Just review the performance of your newly formed company regularly to ensure that objectives of the merger or acquisition are being achieved. You can set your goals depending on the volume and nature of your business. Growth in market share, Enhanced brand strength/reputation, Reduced operating/overhead costs, Entry into new industry or product expansion, Entry into new market or gain the market share, Access to new technologies or know-how, Access to manufacturing capacity/know-how, etc, are some indicators you can use to measure the success of your company. If you are failing here, change your business strategy, work plan, etc, as soon as possible to meet the specific business objectives. Final Words: Merger and acquisitions of companies are risky and chances of failure are high if you are not serious about them. By following the above-mentioned tips, you can easily repel fiasco in an M&A transaction and do the business usually. Source: https://ahlawatassociates.wordpress.com/2017/10/31/tips-to-avoid-cause-of-failure-in-mergers-and-acquisitions/
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7/12/2023 05:02:59 am
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AuthorAmy Jones is a professional legal expert working with Ahlawat & Associates. With a long background of taking up several types of cases, she is able to provide the right legal consultation to their clients in a professional manner and help them to solve their complicated legal problems. she keeps writing about different legal matters. Please follow her on Facebook & Twitter to get her latest updates. Archives
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