How Mergers and Acquisitions can help family business
In any successful family business, family members tend to have different objectives concerning the monetization of their stake in the company weighing that against reinvesting into the business. It is also important to understand that owners are attached to their businesses, not just on an emotional side also on a financial side. This makes it more complicated to look from a rational point of view. The objectives of the individual owners/ shareholders must also be taken into account. For example, the grandfather who founded the company wants the company to remain in the family, on the other hand, his grandchildren may have the idea to sell the company and use the proceeds to start their own business. It is only normal for each of those individuals to have different goals and how they get involved in the family business. Mergers and acquisitions can help satisfy these individual interests.
When should you start thinking of a merger and acquisition as a family member?
For businesses that are experiencing organic growth and the development of new services and products consistently, there may be no need for M&A. As well as, if you have a family with a full shareholder base that agrees with the overall business objective, a merger and acquisition might not be the right direction to take.
But If you find yourself thinking about an impending change that will significantly affect the strategy of the business, then that is the time to consider a Merger and Acquisition. However, if there are instances where opinions and new strategies differ, it is imperative to use M&A as a tool to accomplish such goals.
What needs to be taken care of?
It is important for owners to realize that once they decide to embark M&A, it typically takes a period which can add up to 12 months, whether you are selling or buying. It is their responsibility to identify sellers or buyers, hire advisors, conduct operational, legal and accounting reviews and prepare themselves to sell or buy. The aspect of financing is also crucial. Are you going to finance it through personal funds, third-party capital or bank loans and what financing structure are you going to use?
How M&A can positively influence the family business?
Not only the number of M&A transactions in relation to family businesses to non-family businesses is very large. Also the goals which are pursued with it, differ very much. Where many investors are looking for a quick exit, family businesses look with a long-term view, towards a steadily increasing growth of their business. As a result, family businesses, which are usually focused on one industry, achieve high sales growth and an enormous expansion of their customer base through the acquisition of a company from other industries. There are also many new opportunities with regard to the development of new products or business sectors.