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In this blog we take a look at Mergers and Acquisitions (M&A). In simple terms this involves one company acquiring another by way of a takeover (acquisition), or two companies fusing to form a single larger entity (merger).

The main reasons for a company to execute an M&A transaction are to grow its business (by acquiring or merging with a competitor) or add a new line of business to its existing activities. M&A can either be public (when it involves companies listed on a stock exchange) or private (when it concerns companies privately owned by individuals).

In many cases it is wise to consider using the services of a merger and acquisition (M&A) advisory firm that can provide advice on corporate mergers, acquisitions and divestitures.

M&A advisory firms try to match businesses for sale with prospective buyers. To do this, an M&A advisory firm’s services typically include:

  • Business valuation;
  • Preparation of a pitch including a confidential business memorandum
  • Identification of prospective buyers and discussions with these parties;
  • Providing negotiation of purchase and sale agreement and other deal-related agreements;
  • Assisting with due diligence; and
  • Resolving transaction issues throughout the process.

According to Harvard Business Review (HBR) research, at a time when mergers and acquisitions are increasing at a much faster pace across all industries globally, the failure rate of such acquisitions can be as much as 90%.

The reasons for such an alarming rate are myriad such as companies do not do proper due diligence or don’t have a clear long term strategy. However, there are strategies that companies involved in mergers and acquisitions can adopt to mitigate some of the risks of such a deal

So how can you ensure success for your M&A?

Firstly, it is absolutely vital that the process is completely transparent, realistic and involve all areas of management if success is to be achieved.

In addition the following factors need careful consideration:

  • Be clear from the very beginning on what matters and why. Where is the added value by doing the deal?
  • Estimating synergies is key as by so doing you will also shed light on issues such as due diligence, the structure of deals, and the negotiations that lead up to them.
  • As with any business deal it is invariably the case that there is a small number of actions that will have the greatest impact. So identifying them and focusing your resources on achieving those actions is key to a successful outcome.
  • Merging or acquiring a company can be draining from both a human and financial perspective, and it can quickly spiral out of control if the businesses have not outlined what they wish to achieve for each stakeholder. So clearly defined goals are essential.

Remember that you will be faced with challenges so make sure your strategy assesses the potential risks and complications that could arise during the process.

Consider expert advice

Mergers and acquisitions require a high level of expertise so consider bringing in an expert who can assess the situation and the planned objectives without any favouritism or bias. An independent expert will help challenge claims, validate business decisions and ensure leadership stays on track in its goals.

In addition, an independent expert should look to ensure employees receive the support they need through the merger or acquisition, and make people understand why the changes are taking place. If this isn’t done there is a risk that they will lose focus, become unhappy and potentially be disruptive for the company.

For more information on how The Leadership Team can help contact us at grow@leadershipteam.info and someone will be in touch to discuss your business needs with you.

It is fair to say that there is still a lot of confusion among employers about the mechanics of the Apprenticeship Levy. One area of concern, and particularly relevant to smaller levy paying employers, is what happens if the levy pot is overspent?

For example, those who are only paying a marginal levy might not have enough funds in their ASA account to cover the cost of training and assessment for all the apprentices they want to take on.

Just to remind you: only companies with a payroll of over £3 million will pay in to the levy, so for example if your annual payroll is £5,000,000 then you will pay 0.5% of anything over £3,000,000 – £10,000 – into the levy pot.

So what’s happens if you don’t have enough in your levy pot, as your training requirements are far in excess of the £10,000 in the above example?

Well the answer is co-investment – and this occurs when a levy payer simply runs out of money in their digital account (the pot).

The employer will then be able to use the model that applies to non-levy payers, meaning the employer will have to pay 10% of the remaining training costs to the training provider while the government will then pay the remaining 90%.

Below are some examples of how much the levy costs for differing size businesses:

Employer A: 1,000 employees, each with a gross salary of £20,000

Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance* (Employers get a £15,000 fixed annual allowance to offset against the Levy payment) applied: £100,000-£15,000 means £85,000 Levy payment

Employer B: 500 employees, each with a gross salary of £20,000

Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 Levy payment

Employer C: 100 employees, each with a gross salary of £20,000

Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 Levy payment