Mergers & Acquisitions

At some point, all firm owners face a decision about the future of their business: Change, Sell, or Die. Organic growth is one way to change, and requires generational change and ownership succession to succeed.

Some mergers are true mergers, where similar-sized firms agree to go forward together. Otherwise, the idea of a “merger” means that you are selling your firm into a larger firm, which is an “acquisition” for the larger firm. Semantics.

Mergers & Acquisitions (M&A) consulting provides support to design firms wanting to sell their business or buy a business. It includes Business Valuations and Acquisition Due Diligence.

Alternatives are to (1) Merge with another (usually larger) firm, effectively selling the business in return for shares in another business; and/or (2) Acquire other (usually smaller) practices.

Return to Business Strategies

You Asked...

Click a question to see the answer

1. Why do mergers & acquisitions fail?

    

   PSMJ’s experience is that about half of all mergers & acquisitions fail – that is, fail to live up to the expectations that justified the decision.

   Almost always, these failures occur because of not getting outside, impartial advice on the viability of the “deal”; failing to discover hidden or latent risks in the other practice; and/or values and personality clashes that emerge after the deal is completed.

2. How can we ensure a successful merger and/or acquisition?

    

   Valuations of the business are required in nearly all options (including Ownership Transition). There are at least 15 different methods of valuing a business; most of them inappropriate for professional services practices.

   PSMJ has studied these methods, producing a hybrid model based on historic performance coupled with adjustments for other “risk” factors likely to affect future profitability positively or negatively.

   When buying or merging with another design practice, it is critical to get a professional evaluation of that firm’s strengths and weaknesses. That requires interviews with the clients of the target, together with senior staff of your own practice.

   PSMJ Resources has a long history of helping firms merge, and grow, successfully. It’s harder than it looks.

3. Do we need a valuation of our own company when acquiring another business?

    

   It depends on the terms of the deal. In every case, you need a current valuation of the firm being acquired, for obvious reasons. If the deal is strictly cash, where you are buying out all existing shareholders, you do not need your firm valued.

   If, however, the deal includes paying for all or some part of the shares with your company shares, then you will need a valuation to prove the value of what you are offering the seller.