Mergers and Acquisitions are Always Negotiable

RCS Influencer Tammy Hall says that understanding the pros and cons of an expansion deal can help you prepare for the process. 

Determining the path to growth is a key question faced by all business owners. Do you move your bottom line by investing within the company or expand by acquiring other firms?  This is a question I am sure all companies have faced at some point in their business. 

We have seen several mergers and acquisitions over the last five years including ourselves with an asset acquisition in Sarasota, Florida to expand our operations north.  We know that mergers and acquisitions happen all the time and while mergers and acquisitions can lead to tremendous growth opportunities, they can also come with substantial obstacles for the teams involved.   

Selling or purchasing typically involves a substantial amount of due diligence and takes time. If you are considering a merger or acquisition, due diligence is critical to preparing.   

Understand that merger and acquisition valuation is negotiable.  Are you using market comparable, are your competitors selling for x times revenues or x times earnings before interest, taxes, and amortization (EBITA)? Are you growing faster than the competitors?  Is the acquisition through a financial buyer or a strategic buyer, what is company’s historical financial performance, what is projected financial growth, what are the business, financial and/or legal risks company faces, what is the experience and expertise of management team?  Be sure you understand the pros and cons of an earnout as a way of bridging difference in an acquisition price.     

There are many components to a merger and/or acquisition.  It is critical to be prepared, put the right team together whether you are purchasing or selling and remember it’s a negotiation.   

Tammy Hall is the director of marketing and service division for CFS Roofing Services LLC. See her full bio here.