InSight

Exit and Growth Strategies for Middle Market Businesses

M&A Post Close Success

By Catherine Patience | Sep 01, 2015

synergyMidway through 2015 there is continued optimism surrounding the M&A markets and a growing appetite from both financial and strategic buyers for middle-market companies valued between $10 and $250 million.  Most founders care deeply about the companies they have created and grown and when it comes time to sell, they want to have reasonable assurances that the deal they are making is good for everyone… employees, clients and themselves, especially if part of the deal structure includes a continued equity stake, an earn-out or seller note.

M&A post close success is not a given.  In fact, the recent 2015 Deloitte Annual Integration Report, which surveyed executives involved in M&A transactions, states that “Almost 90 percent of corporate and 96 percent of Private Equity respondents said some portion of their transaction fell short last year.”   Reasons for the short comings were placed in one of two camps…”Out of my control” or “Within my control.”  Economic and market sector forces impact deal success and there’s not much one can do about it.  However, there are a number of success factors that one can manage and control.

When more emphasis is placed on due diligence, there is a stronger likelihood of achieving post close goals. A buyer wants to be reasonably sure that the financial records and projections are accurate so future earnings benchmarks can be met or exceeded.  In addition, proper due diligence can uncover hidden costs, contingencies and commitments and provide an important gauge in evaluating the integrity and quality of management.

Uncovering and emphasizing synergies between the combined companies is one of the key factors that will lead to a successful merger and unfortunately, there is a short window within which to capture this value.   Having an integration plan in place prior to the close will help tremendously.  Another key factor in the success of a deal is effectively involving and optimizing management from both firms.  Couple that with consistent and transparent corporate communication, and you’re well on your way to success with an acquisition or merger.

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