Considering the benefits of a merger, acquisition or partnership

With key Covid-19 government support schemes gradually decreasing, many prudent Australian organisations are seriously analysing future opportunities and threats.

The three options that your business or NFP might consider are:

  • A Merger
  • An Acquisition
  • A Partnership – including joint ventures and project partnerships.

As Australia’s financial landscape begins to reshape, now is the perfect time to ‘fast-forward’ and consider potential mergers, acquisitions or partnerships that could help future-proof your organisation and the services you provide to customers.

Fast forward to prepare for the financial future

Time travel may sound complicated, but a simple fast-forwarding exercise will provide context for your next business move and indicate whether it should be a merger, partnership or purchase of another entity.

So far, with government support, Australia’s markets have responded well to the pandemic impacts. However, a savvy forecast should allow for economic volatility or a potential economic downturn occurring after all government support forms are inevitably wound back.

All forecasts also need to factor in the impacts of changes at the state and federal government level. Fast forward six to twelve months, and the Australian business scene could look like this:

  • Australian government stimulus measures for all sectors are finished
  • The number of insolvencies may jump
  • Surviving organisations may be set adrift on the market at the same time.

NFPs should also look ahead for change. For example, consider how changes to the NDIS have already made an impact, and what the future might hold for your organisation.  Government decision making will be focused on areas where they know they can stimulate the economy, and being ready to take advantage of opportunities may be strengthened by a strategic merger.

Why should you act now if considering an acquisition?

Many Australian businesses will be facing ‘stimulus package withdrawal’ at the same time, competing for the same diminished sources of revenue or heading to insolvency within twelve months. This could mean that it will become a buyer’s market within the year, not a seller’s market.

If you forecast that conditions will become more challenging for your industry, commit to being proactive now. Any bargaining position or negotiating power your business has currently may well disappear within twelve months.

What to consider before committing to partner up

Merger negotiations are a specialist area, and legal advice is essential to protect your business IP and other assets.

Before you join forces, seek expert advice on:

  • the legal implications
  • the procedure to set up a new entity
  • managing the new entity
  • formalising a name change.

Stepping out as partners

Make sure all partners have agreed on standards for the way the new entity will operate. Document the latest standards and communicate them, internally and externally. Some key areas of action could include:

  • informing staff, so they know their rights and responsibilities
  • informing customers, suppliers, shareholders, donors, and other stakeholders of changes that affect them.
  • defining how you will handle disagreements or unexpected events such as the death of one of the owners in the business.

Focus media communications about the new partnership on renewing public trust and community support, as well as brand building.

How Hopscotch Accounting can help

Hopscotch Accounting can assist by reviewing the financial and tax impact of an acquisition or sale. We help businesses or NFPs understand the financial implications and, most importantly, conduct some sensitivity analysis on those numbers, analysing best and worst-case scenarios.  Remember, as 2020 has taught us, even the best plans don’t always eventuate.

With our assistance, you will make an informed decision on your transaction and ensure it is priced correctly.

Conclusion

If your organisation needs assistance exploring options for mergers, acquisitions or partnerships, Hopscotch can help. Our free ebook, A Roadmap to Organisational Resilience: Tips for strategies and success, provides advice for business owners, directors, CFOs, and managers of both businesses and NFPs who are focused on rebuilding after the pandemic. Our team can provide further advice with timely financial forecasting and accounting strategies to assist with initial decision making and beyond.

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