What happened to the "M" in M&A ?!?

The acquisitions seem to be what always makes the headlines, but what about mergers?? Yes, two companies can join forces to form a single company.? In my corporate past I worked for a software company that was number 2 in sales in its market.? We merged and joined forces with the #4 company who had more advanced tech but a smaller customer base, which was a good match for our established market position and brand name recognition.? The combined company was then in a much stronger position to compete with the #1 company, which was a much larger organization.? This would be an excellent example of a classic merger, but it comes with challenges.? Who is in charge?? Who holds the controlling financial interest for the combined company?? How will the cultures and processes of the two companies be united?? How will the merger be communicated to current and future customers as well as business partners?

A “merger”, in my opinion, can take many other forms which usually happens as part of a company’s business development strategy.? How is your company going to grow?? How is your company going to develop, expand and diversify its products and services?? How will your company reach new markets and customers?? Are there other companies and individuals that can fulfill a need or function for your business that you currently do not have?? Is there a way to expand your workforce and capabilities through outsourcing or contracts?? What services and software exist that will allow you to improve your business without adding permanent staff or significant expenses?

People think of M&A as something that impacts the beginning and end of the “normal” (if there is such a thing) lifecycle of a business. ?The business is planned and developed which may involve an acquisition, a partnership, and/or a franchise agreement. ?The company is then established, and its sales and operations are stabilized.? It is successful and grows, which will eventually lead to an exit strategy that is either the business owner’s retirement, a significant life event in company ownership, or the sale of the business.? So, where is the M&A in the middle?? This is where the art of business development strategy comes into play. ?Don’t have a business development strategist?? It is a function that can easily be provided by a consultant or a coach and does not have to be a big deal or a major time constraint.? Most coaches and consultants will do an initial, introductory consultation where you can discuss your business and where it is going.? Yes, you are going to get a sales pitch, but it also gives you the opportunity to brainstorm and visualize the future of your business, for free, with a trained professional.? Here are some examples:

Partnership:? Simply put, a partnership agreement is one company agreeing to help another company out, or even better, two companies helping each other out in a mutually beneficial way.? If you sign an exclusive deal with a supply chain provider, will it give you better pricing and more consistent delivery of service?? It is an option that is often used to correct a problem or resolve a challenge that a business faces.? For example, if an entrepreneur outsources their HR function, bookkeeping and payroll to a company that specializes in those tasks, they will reduce costs, and management will have more time to focus on other tasks.? A good way to look at this is any process or function within your business that is done repeatedly by humans, is an opportunity for outsourcing, automation, efficiency gains and cost reductions.? One of my favorite examples of this was a potato chip company.? Their snacks were manufactured in a centralized plant, in a large city.? They owned a fleet of trucks that delivered their products to stores and distributors, in other communities, within a few hundred miles.? Their challenge/opportunity was that the trucks were travelling back empty to the city each day.? They partnered with a company that sold handmade arts and crafts across the city but had difficulty finding skilled craft workers and artists close by to create inventory for their stores.? The craft company’s challenge was that buying or renting trucks and/or paying for shipping to get their goods into the city was an expensive burden.? The partnership agreement was to have the chip trucks transport the craft goods back to the city after the snacks were delivered each day.? It was a win/win.? The chip company got extra revenue for something that they were already doing, and the craft company significantly reduced their operating expenses and logistical challenges.

Joint Venture Agreement (JV):? My personal favorite.? A JV is where two or more companies agree to combine their skills, knowledge, and resources to form a new business venture together.? A simplified example would be Bob’s Burgers food truck company, partnering with Ida’s Ice Cream food company to launch a new Food Truck business that sells fast food and frozen desserts.? The challenge is that both companies must contribute skills, knowledge, resources and effort towards the success of the JV.? If one company only gives another company money and expects the other company to deliver a result, that is NOT a JV, it is an investment.? The rules and regulations are fairly clear on what is and what is not allowed in a JV.? Most of these laws are to prevent fraud and theft, but they will also dictate any tax burdens that you may face and other details that need to be considered. ?Unknowingly stepping outside of what is 100% legal and ethical can lead to fines, lawsuits, and unwelcome investigations, so it is recommended that you work with a trained professional that is experienced in putting JV deals together.? The plus side here is that your existing company faces little risk.? Your existing business basically becomes part owner of the new JV business but little else changes.

Franchisor Agreement:? This is where a successful business documents its processes and partners with a company that will sell franchises (copies of your business) to franchisees (entrepreneurs) in other geographical locations.? The original business and the franchisor partner then share some of the revenue and profits from the newly created companies.? This is a great way to expand and grow your business concept and it is very commonly used in restaurants and service businesses.

At the end of the day most entrepreneurs are constantly thinking about growing, expanding and improving their businesses.? The opportunity that many of them are missing is that they are not collaborating with their colleagues and other entrepreneurs when they do this.? If you own the best carpet and flooring company on the north side of town, the person who owns the best carpet and flooring company on the south side of town may be a potential partner and not a competitor.? Can the two of you join forces to better compete with the big box flooring company that sits in between you? ?There are no limits.? Brainstorm with your colleagues, network through the Chamber of Commerce, look at other industries and markets that might be a fit for your product or service.? Finally, find, hire, or partner with a business development consultant, coach and/or strategist.? You may likely discover new opportunities for your business that you have not yet considered.

#entrepreneur, #business, #mergersandacquisitions, #jointventure, #partnership