Before You Merge, Ask These Questions
Source: Partner Insights
Following are excerpts from 15 Questions to Ask Before a Merger or Acquisition, reprinted with permission from Aquila Global Advisors. Contact information is below.
- What is the firm’s primary reason for a merger? Acquiring talent, increasing profits, and expanding services or geographic coverage are common reasons.
- How will the merger help the firm achieve its strategic vision? Aquila maintains that you must be able to answer this question—otherwise, there is no reason to merge.
- Does your firm have an effective leader? Does the merger partner have one? The new, combined firm will need this component to succeed. Only one person can be the top manager. Sharing power doesn’t usually work.
- What will be the name of the new firm? This is the leading deal breaker in merger negotiation.
- What will the combined firm’s structure be? Include departments, heads of practices, and the like.
- How will partners be compensated? Profitability gaps are a key issue that must be considered in developing the new compensation structure.
- Will the merger affect earnings? The first year normally results in an earnings drain, as people work to become familiar with new systems and leaders, and productivity tends to drop. Savings that you thought were there will disappear or take longer to materialize.
- Will the merged entity require new capital contributions? One firm that is highly leveraged merging with one that is not represents a major philosophical difference.
- How will you communicate the coming merger to staff? Telling key people as soon as possible is important, before the rumors begin. Decide early who you want to retain and work to keep them. Every staff person will want to know how the merger is going to affect him or her. Consider offering a “stay bonus” for those who remain through the first year.
- Are there any deal breakers? The sooner you learn about them, the quicker you can move on.
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From Partner Insights, Aquila Global Advisors, LLC, April 8, 2008, www.aquilaadvisors.com.
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