Qualitative Factors To Consider In Closing A Deal In Merger & Acquisition
What are the qualitative factors for you to consider when you are about to offer to acquire a targeted company / business assuming you agree to the valuation proposed to you ?
Among other qualitative factors to consider in closing the acquisition, the most important ones are these 5 factors :
1. Who actually owns the Intellectual Property right(s) ? The targeted company or the Seller owner ? Make sure you acquire this Right.
2. Is the Seller owner going to be retained in the business after acquisition or be barred from doing same trade ?
If the deal calls for the selling owner to be retained in the company for say, 3 years, to “guarantee” the profits for the full payment of the acquisition price would be made over following 3 years, there may be compromise in Management Control ( see point 3 )
3. Have you acquired Management Control or just Equity Control ? You have acquired all equity shares of the target company, naturally you have acquired Equity Control. However, if the previous Owner is retained in the company as say, Consultant, there is possibility the existing staff would still listen to this person in the day to day running of the company.
4. Please remember to assess the functionality of existing Fixed Assets. If you need to put in further investment to either maintain or enhance these assets, remember to factor this additional forecasted investments into your final consideration.
5. To the employees, the change in the shareholders has nothing to do with them. However, to the new buyer owner, it may mean inheriting heavy employees contingent liabilities. For eg, should the new buyer owner start to retrench employees after the acquisition, the redundancy payment may depend on the number of years of service by the retrenched employees. It is wiser to issue new employment contracts to selected staff taken over.
Hope above tips help.
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