Mergers and acquisitions can lead businesses to a growing and exciting time. However, getting ready for the process can be difficult with thinking, planning, and taking action. Here is what you need to know for your business to get ready to merge with or get bought by another company.
1. Have a System in Place and Established Processes
Having your processes and systems in place is essential for a smoother transition for your business during a merger or acquisition. Your agency needs to explain to your buyer exactly how it functions. Some questions to help you are:
- How do you manage your monthly workflow?
- What is your billing process?
2. Aim for Future Growth
While the process is moving forward, it’s essential to be prepared for the post-closing growth and everything it entails. You could face challenges such as:
- Onboarding and managing new clients faster than before
- Adapting to cultural shifts
3. Improve Profitability
Many company valuations are based on their historical profitability and future profits. Ways to streamline and consolidate expenses with the buyer include:
- Sales and marketing
- Rent and utilities
4. Set Advisory Team
Agency owners can benefit from having M&A advisors to help with the merging and acquisition process. You’ll also need a lawyer to negotiate contracts.
5. Increase Business Performance
Ideally, you’ll want to sell your agency when revenue is increasing. Going through the M&A process when your agency has momentum is critical if your goal is to maximize the agency’s value.
6. Establish a Senior Management Team
Consider whether you need to establish a senior management team through long-term employees that know the agency and can run the agency after the M&A. If you don’t have anyone within your business that can take this position, consider a senior hire for a management position to handle a portion of the owner’s responsibilities.
7. Understand Your Business’s Value
Knowing your business’s value from your side is one thing, but understanding how a buyer views your business is essential. When you’re evaluating your agency from a financial and strategic standpoint, consider questions like:
- How profitable has it been, and what do profitability projections look like?
- Does it have a broad revenue base, or does most of its revenue come from a few clients?
- How much of the revenue is recurring?