Merger and acquisition (M&A) is one of the most effective strategies that aids in the bottom-line growth of any company or business. A company may decide to merge with or acquire another business or company for a multiplicity of reasons. While some may do it to expand into new markets, others may do it to clear out the competition, boost business productivity, or gain new customers.
However, the process of M&A is often fraught with risks and failures, and it requires careful vigilance and patience to navigate through the deals to protect the interest of your company. Even a small issue could turn out to be deciding factor for success or failure.
To add to the complexity mentioned above is the M&A of overseas companies. If you’re in the process of merger with and/or acquiring a France-based company, there are plenty of issues to cover. First and foremost: Legal issues.
Legal Framework for Mergers and Acquisitions in France
The statutory framework that determines the laws regarding the sale and purchase of legal entities in France is provided by the French Civil Code and the French Commercial Code. Besides this, the regulations relating to takeovers are provided by the French Monetary and Financial Code and the French Financial Markets Authority or Autorité des Marchés Financiers (AMF). Considering the complexity of the local laws and regulation, you should work with an agency facilitating merger and acquisition in France.
While the French Civil Code defines the basic provisions of the contract law and company law, the rules regarding the financial services industry and public offerings of securities are defined by the Monetary and Financial Code and the AMF. The French Commercial Code also determines the merger control rules, which apply to all cross-border mergers which are likely to have an effect on the French market.
How to Execute M&A Successfully
There are certain steps one can take to better navigate through these turbulent waters. Following are some of the ways you can execute a successful merger and acquisition – not only in France, but also in other countries.
1. Assess Your Liquidity and Financial Health
It is extremely important to perform a thorough check of the financial health of your company, in order to determine if you have the financial wherewithal to undertake an M&A deal. This means ascertaining whether your company has enough liquidity to make an investment and execute a transaction successfully.
The next step would be to find out if the capital structure of your company would be able to tackle the additional demands that come with the addition of a new entity. If not, then you need to come up with equity funding strategies and also assess the range of debt.
2. Create a Transition Team
A large part in the successful execution of an M&A is played by the team you put together to oversee the transition period. It is this team that sets the tone and defines the direction for the new company. To ensure a smooth transition, it is advisable to have experts from both companies for creating and executing strategies.
The transition leaders can be from the finance teams, operations teams, executive teams or sales and marketing teams of both the companies. Their function is not only strategizing but also establishing communication and fostering synergy with other groups. This ensures that everyone is on board with the changes that will inevitably come with the transition stage.
3. Survey potential M&A candidates
After deciding to undertake an M&A deal, it is important to search the right candidates that would be the best fit for your company. For screening new candidates, it is important to look into integration feasibility, which refers to the operational and organizational challenges that would come with integrating them.
Developing revenue and cost models for the combined organization is also an important step in determining the ideal candidate.
4. Developing an Acquisition Plan
It is important to develop an M&A strategy that fits with your company and your risk limits. This involves the evaluation of “merger readiness” across all the departments, and the identification of organization structure post the merger. It is imperative that your M&A planning process is comprehensive and disciplined. Some key elements that usually go into this planning process are:
- Developing a merger strategy, which will take into account the business or product, geographic elements and turn-arounds, among other elements.
- Developing a merger and acquisition policy that defines roles and responsibilities and important procedures.
- Identification of M&A partners or candidates.
- Developing a merger integration plan.
- Post-merger assessment of the elements of the acquisition process.
5. Establishing Communication and Transparency
Open and transparent communication is of paramount importance in the success of a merger and acquisition. This ensures that both the companies understand the vision and goal of the merger, which prevents any misunderstandings in the future.
It is the responsibility of the leadership team to keep everyone updated on the new strategies, groups, opportunities and any changes that are being undertaken.