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Mergers, Acquisitions and Alliances

Adding Immediate Value

A quick way to add value to your company can be done easily via an alliance, acquisition or merger. It sounds too good to be true. However, these methods do work…under certain circumstances. Take for instance, an alliance.

The Alliance

Some advantages of forming an alliance are, they are quicker to form, more flexible to operate, less risky, and require less cash. Other considerations are both companies must be focused on the same objective, the alliance must be supported by senior management, it must have compatible corporate structures, the “point people”  from each company must be of “peer” ranking, measurable goals must be established so that progress can be measured.

Mergers and Acquisitions

According to The Mergers and Acquisition Handbook, (ISBN 0-07-053353-9) “In a study of thirty-one acquisitions, we found most of the stated management motives for making an acquisition were not related to actual performance. Achieving acquisition objectives seems to be a very difficult task; the lure of quick profitable growth through acquisition does not often materialize regardless of motive. Our overall finding was that there was no important association between post acquisition performance and strategic fit in terms of motives or product line synergy. Given our sample size, we cannot say that strategic fit is of no importance but our study joins others in supporting such a conclusion.”

Red Flags

Touting savings due to the elimination of overlapping services and the results of combining like synergies, often fail to materialize. Many times the corporate culture of the acquiring company and the target company do not mesh. Another reason for the merger or acquisition not working is that the acquiring company is only interested in the bottom line often at the expense of the target company.

Are Bankrupt Companies Good Deals or Not?

Another consideration in acquiring a company is that it is already in bankruptcy.  To shorten the reorganization plan time for the company filing Chapter 11, often the parties involved will request a bankruptcy auction under Section 363 of the Bankruptcy Code. In this case, the Judge will allow selected assets or even the entire company to be sold quickly at auction.

Due Diligence-A Necessity!

Due diligence assures that the target company is who is says it is and does what it says it can do. Acquisitions that provide instant product line extensions may be easier to integrate from a product standpoint since the distribution channels have been established and all that is necessary is to fill the pipeline.  After having performed the due diligence successfully, it is possible that a merger or acquisition can add to a consolidated bottom line in a large, and immediate way.

FH Cooper’s Role

We can help you establish criteria for an alliance partner and help locate one. We can provide due diligence for the proposed arrangement from every aspect and provide you with data necessary to limit the risks and experience the rewards. We can also promote the new arrangement and continue to support it with publicity.