March 14, 2013

Business mergers don’t need to involve excessive risks

Starting a business – regardless of the industry – often involves a great deal of risk. Company founders are taking a chance that customers will want to use their product and that investors will contribute to their organization. Once those hurdles have been overcome, though, and a firm has experienced successes, the exit strategy should not involve such chances.

Business mergers need to be handled in a way that benefits both sides, especially for the owner of a company that is being acquired. No entrepreneur wants to see their creation turned into something entirely new, or have the main idea behind it be changed. Additionally, it is important to properly handle the financials of any transaction. M&A Advisors understand the intricacies of the deal-making process, and will keep organization heads in the loop the entire time. 

“Deal-making is a high-pressure business where entrepreneurs sometimes believe they can manage the process as they do their own businesses,” explained a New York Times article. “They not only fail to understand what the role of the banker is, but often seem heedless to the risks. This may have succeeded at the time to build their business, but they do so at their peril in pursuing a deal.”

Additionally, technology and business blog Entrepreneur suggests that owners need to have established a clear reason for why they’re selling the company. Buyers need to understand the departure and what an organization’s prospects entail. This step is also crucial when it comes to business valuation.

It’s important to know that advisors are willing to work for one’s best interests. The decision of, “It’s time to sell my company,” is not always an easy one, and business leaders should take the necessary precautions to see that it’s done right.