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WHAT ARE THE MAIN STEPS IN A COMPANY MERGER PROCESS?


Edson Gissoni and Rual Rousselet – Executive Partners of DMS PARTNERS


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Company mergers are a complex process that involves combining two or more organizations into a single entity. This strategy can bring several benefits, such as increased market share, cost reduction and operational synergies. However, for the merger to be successful, it is essential to follow a series of steps and adopt specific precautions. Below, we present a detailed guide on the company merger process.


1. Strategic Planning


Defining Objectives


Before starting the merger process, it is essential that the companies involved clearly define the objectives of the merger. This may include market expansion, product diversification or cost reduction.


Market analysis


Carrying out a detailed market analysis is crucial. This involves understanding the competitive position of companies, industry trends and consumer expectations.


2. Due Diligence


Financial evaluation


Financial due diligence is a critical step. It is necessary to review the financial statements, liabilities, assets and revenue projections of the companies involved. This helps identify risks and opportunities.


Legal Analysis


In addition to the financial assessment, it is important to carry out a legal analysis to ensure that there are no legal or regulatory pending issues that could impact the merger.


3. Structuring the Merger


Fusion Models


Deciding on the merger model is essential. Options include full merger, merger by incorporation or joint venture. Each model has its particularities and legal implications.


Valuation of Companies


The valuation of companies must be done in a fair and transparent manner. This may involve using methods such as discounted cash flow or market multiples.


4. Communication


Internal communication


It is essential to communicate the merger in a clear and transparent manner to all employees. This helps minimize uncertainty and resistance to change.


External Communication


Communication with customers, suppliers and stakeholders is also vital. Communicating the benefits of the merger can help maintain trust and loyalty.


5. Integration


Integration Planning


A detailed integration plan must be drawn up, addressing aspects such as organizational culture, IT systems, operational processes and human resources.


Change management


Change management is a critical factor in the success of the merger. It is important to involve employees in the process and offer support during the transition.


6. Monitoring and Evaluation


Performance evaluation


After the merger, it is essential to monitor the performance of the new entity. This involves analyzing financial and operational indicators to ensure that the merger objectives are being achieved.


Necessary Adjustments


If areas for improvement are identified, adjustments must be made quickly to ensure the continued success of the merger.


Conclusion


Merging companies can be a powerful strategy for growth and innovation, but it requires careful planning and meticulous execution. Following the steps mentioned, paying attention to the necessary precautions and using the advice of a team of experts can significantly increase the chances of success in this process. With a strategic and collaborative approach, companies can not only survive, but thrive in a competitive marketplace.


It is supported by DMS Partners' team of Mergers & Acquisitions (M&A) specialists.


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