How Companies Can Be Ready for M&A in 2024

By Ira Rosenbloom.

Mergers and acquisitions (M&A) activity in the accounting industry has been robust and competitive – and all signs point to a continuation of this trend, particularly in certain markets and for certain companies.

If you’re considering becoming a buyer or seller this year, there are essential steps you should take that can improve your chances of success. Here are five important steps for both sides at the negotiating table.

1. Clarify the Vision. In general, acquirers are looking to make more money, increase market share, and expand their teams to provide more specialized expertise and improved customer service. Business leaders must first determine what they want the future business to look like; in other words, they must create and clarify their vision of the goal and outcome.

Companies wishing to merge must also have a vision. The more specific the details, the better. Understanding how you plan to provide more services (and to what types of customers) will help clarify synergies. Also detail talent expectations and potential career paths for key team members.

Sharing an exciting vision will motivate parties to move forward and can help overcome any obstacles that might develop.

2. Identify and treat anxieties. Mergers and acquisitions bring change. For some, the change will be significant; for others, change can be distressing.

Teams on both sides need to gather their concerns and share them internally and then openly with each other. If anxieties are not addressed early on, the process risks being derailed later when more time and energy have been invested.

It is not uncommon for both parties to have common concerns around, for example, job security and liability. Resolving the anxiety may need to be reflected in the terms of the agreement.

Companies should be prepared to halt the M&A process if the pushback is insurmountable. The sooner this problem is resolved, the more efficient and productive you will be.

3. Prioritize integration. Ideally, both companies will be willing to accept best practices and agree on which company policies should be adjusted. Additionally, most transactions will include certain executives transitioning to retirement, changing roles or winding down.

The more comfortable the parties are with the plan, the more they will be able to join forces.

Acquirers should be prepared to provide a description of their past transition successes. The company seeking a transition should be detailed on the timeline, skills and personalities needed to lock in top clients..

In 2024, all businesses continue to face a workforce availability challenge. Both parties need to be sure that the integration and transition are viable and know what the problems may be. If integration takes too long, the parties may need to end discussions or reach an agreement in stages.

4. Walk the talk financially. Finances will be a first barometer of viability. Both parties must master the metrics of their businesses and have credible market-based requirements for deal terms.

It will be easier to find a mutual comfort zone regarding compensation and purchase price/retirement product when the parties have a deep and clear understanding of the financial factors for success.

Both companies should have clear expectations for the combined company’s finances in the near term. For example, they need to understand the scale of investment required to advance the agreed business program and plan a timeline for achieving ROI from the deal. Understand the first year’s revenue and profit, as well as a realistic idea of ​​how it will improve.

Small businesses need to understand the acquirer’s overhead structure and be prepared to invest in that overhead. Large companies must be able to achieve economies of scale to help smaller companies recover and grow profits over time.

5. Focus on potential. All parties involved in mergers and acquisitions have money in mind. Buyers want to increase their turnover and financial results; the other camp wants to maintain prosperity and gain security.

The more time it takes to determine the potential benefits, the better the merger decision will be and the more positive outcome will be.

Quantify and identify potential early in the conversation. The greater the confidence in potential, and the higher the potential, the more compelling the opportunity for everyone.

Mergers and acquisitions are about choices. In 2024, choosing to make a deal and with whom has become more intense. All parties must have a plan for the agreement and the strength to achieve it. To succeed in M&A in 2024, be very disciplined and very opportunistic. The market is in a provocative state.

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Ira Rosenbloom is Director of Operations at Optimum Strategies.