Experts suggest that savvy companies should always consider mergers and acquisitions – or M&As for short. Even if there are no signs of a merger or acquisition in your future, keeping a potential M&A in the back of your mind prepares you for one that may eventually occur.
Legal Aspects
From a legal standpoint, if you haven’t chosen your company’s legal structure yet, you should think about your exit when you do. It can be tempting to start as an LLC or a pass-through entity as these are tax-efficient, especially for startups. However, the institutional investors who are likely to acquire your company in the future may prefer a corporate structure. Thinking about this ahead of time can help eliminate the need to change structures in the future, which could be costly and make you potentially miss an M&A opportunity.
Another legal aspect of always thinking about M&A is considering requests for due diligence. You want to make sure you are not only consistently compliant but that you also document that compliance record. Potential M&A investors will want these records before working with your company. Having the information already accessible will make any future M&A go much more smoothly. M&As can be incredibly fast-paced and stressful, so being prepared ahead of time can make all the difference.
Economic Aspects
From an economic perspective, always considering M&A ensures that your company is ready to seize any opportunity that arises. Working with a lawyer early on in the process can help open your eyes to various paths and options.
It’s also important to remember that mergers are common regardless of the economy. When the economy is slow, mergers sometimes become necessary to survive the market conditions. When the market is doing well, investors often like to take advantage of that climate.
