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Investment banking: Merger and aquisition roll-ups, part 2

By Bob Hodgson

Last week’s article described M&A roll-ups. This is where a platform company acquires smaller companies in a fragmented industry. The companies are then integrated into one company. This is the easiest and quickest strategy to grow a business. This topic is being continued this week.

Bob Hodgson

Investment bankers are heavily involved in M&A roll-ups. This allows the business owner to proceed with running the company while the investment banker becomes an extension of your company. The investment banker will be responsible for your merger and acquisition matters including but not limited to:

Fielding inquiries from would-be acquirers or representatives seeking to sell you a business.

Conducting searches for strategic acquisitions.

Define screening criteria such as synergies, company culture, service and quality goals.

Develop a target company profile for acquisitions.

Develop an offering memorandum that describes your company goals and objectives.

Define reasons for acquisitions with compelling benefits for prospective seller.

Define criteria to qualify and screen prospective companies.

Summarize appropriate acquisition company for client’s review.

Analyzing acquisition proposals.

Negotiation of acquisitions and coordinating legal, accounting, due diligence and other services.

Coordinate publicity and news releases to trade journals and the press.

Advise on all types of merger and acquisition matters

Roll-up integration is a complex undertaking. There are many personalities, company cultures and skill sets that need to be considered. This cannot be done instantly. The best integration approach is to break it down into these three phases over a two year period:

The first phase should focus on the financials and integrating the financials into one entity. The businesses need to keep running the same as they were prior to the consolidation.

Phase two is integrating all of the back-office. These are the functions that are not seen by the customer such as accounting, planning, inventory management, supply-chain management, human resources and logistics. These functions could be located somewhere other than the company headquarters.

Phase three is integrating the front-office. This is an area where visitors arrive and first encounter staff personnel which is normally in the marketing and sales area.

Trying to consolidate all at once will only result in mayhem which will result in things not working out as planned. This could also create poor company moral with disgruntled employees resulting in resignations and falling revenues

Amvest Financial Group is a leading international investment banking firm based in Kansas City representing clients with sales from $10 million to over $6 billion.

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