Common Mergers and Acquisitions Misconception You Should Be Aware Of

Are you thinking of executing a merger and acquisition in Singapore? An M&A, when done correctly, can benefit all parties concerned. When it comes to mergers and acquisitions (M&A), each corporation's transaction will be unique based on its unique business structure, internal policies, and management procedures. As mergers and acquisitions expertise, Oakwood has compiled this checklist of three common misconceptions to avoid when pursuing a merger or acquisition.??

The biggest issue for businesses considering mergers and acquisitions is the risk throughout the entire process. Determining and measuring the original investment is difficult enough, and keeping compliance and performance after the merger or acquisition can also be more burdensome. M&As, by definition, are complex and necessitate careful planning and attention to detail. It is always best to seek professional counsel like Oakwood, before continuing with any transaction. In the meantime, we have identified three keys about mergers and acquisitions that you should be aware of. So, what are the misconceptions of M&A? Let's examine them more closely.??

False Assumption #1: Mergers and acquisitions can take up to six months.??

While shorter time frames are conceivable, most mergers and acquisitions will take at least a year to complete. Laying the appropriate groundwork (such as market research, developing your strategy, identifying prospective businesses, and so on) should not be rushed, and thorough due diligence should take at least a month.??

Companies that rush through the process generally suffer the consequences in the long run. This was the situation in 2012, when Hewlett Packard (HP), a giant US tech company, failed to perform basic financial analysis and due diligence in its acquisition of Autonomy. Autonomy in fact had an inaccurate income statement, balance sheets, cash flows and footnotes. HP lost almost $5B in the process and got sued by the shareholders in federal court for negligence in missing red flags related to the purchase.??

Be realistic about your objectives and resources, and understand that a substantial investment is required for a successful M&A. Before even considering an LOI, assemble a dedicated M&A team composed of legal, corporate, and financial experts to conduct market research. You will be able to identify prospects while staying focused on your overall acquisition strategy if you constantly analyze the current environment.??

False Assumption #2: Always focus on closing the deal??

Although it can be inviting, avoid the temptation to make closing the deal your solitary goal. Many CEOs and Directors will act aggressively when conducting a merger or acquisition, however, it is essential to always maintain discipline and caution.??

Although growth is important, it is equally necessary not to lose perspective. This was the situation for large corporations like AOL and Time Warner. America Online merged with Time Warner in a stunning $350 billion transaction two decades ago. It was, and continues to be, the largest merger in American corporate history. Both firms were dominant players in the interactive service and entertainment industries, so merging the two businesses seemed like a natural move forward. The implementation, on the other hand, had numerous flaws. In the early twenty-first century, a lack of due diligence on company culture, a failure to understand the landscape of the media industry, and an inability to see the future of the internet led to a massive business catastrophe.?As the promised synergy between the two companies never materialized, this deal eventually failed.?

False Assumption #3: The restructuring of business culture can wait.??

You should consider how you will restructure the two businesses into a single corporation before issuing the LOI and until you secure the final offer.?It is essential to get synergy with the new company’s culture in order during a leadership transition or it will risk disengagement. Forbes stated that company’s culture has the potential to be the glue that holds a company together during times of change.??

Managers from both entities must interact effectively and champion the post-integration milestones one by one. They must also be familiar with the target company's branding and customer group.??

If management is perceived as detached and unconcerned about customer needs, the new business risks losing customers. You can ensure a smooth restructure that minimizes employee friction while remaining legally compliant by retaining the services of experienced M&A attorneys and financial experts from the start.??

This is what happen to Snapple that was acquired by Quacker Oats for $1.7 billion in 1993.?The acquiring management did not comprehend Snapple's culture or how they connect with their customers. Snapple's previously famous ads became diluted with inappropriate customer marketing signals. As a result, in just 27 months, Quaker Oats sold Snapple for a $1.6 million loss.??

Due to its solid reputation and welcoming climate for business, Singapore has established itself as a hub for local or foreign business partners to synergize together. However, it is essential to take time in building your Mergers and Acquisitions team with advisors who have experience in complying with challenging M&A requirements. Contact Oakwood's team today at +65 8940 3532 to set up an introductory consultation and learn how we can help your company.??