Robert Macia knew he needed to make a change to stay competitive in the engineering and landscape architecture industry. In Fall 2012, the president of Raleigh, N.C.-based Stewart Engineering had a choice to make: He could remain independent and develop his in-house technical expertise to stay competitive in the future, or he could merge his company with long-time ally Haden Stanziale.
After crunching the numbers and revisiting his company culture, mission and future goals, he decided that the merger was the best option to accelerate his growth. While the full impact of his choice has yet to be realized, Macia feels confident in the move because he conducted the proper due diligence.
A merger can help a company expand its capabilities and, ideally, its customer base by finding a partner with like-minded goals. An acquisition allows you to grow your business through the purchase of another company or, on the other hand, sell your business and exit on your terms.
Mergers and acquisitions also can complicate matters for your business and raise questions about how the move will impact employees and long-term profitability. Carol Roth, author of The Entrepreneur Equation and a former investment banker, recommends you consider four key questions before making a decision related to a merger or acquisition.
Understanding how the merger will change your company and its primary objectives is essential. You often start a business with a particular mission in mind, but collaborating with another business can mean veering from your original script.
For Macia, the answer to this question was clear. The merger with HadenStanziale resulted in a more dynamic company comprised of 115 employees and 60 licensed professionals with expertise in land planning and design, as well as construction and transportation.
“We have been able to generate greater interest in the new firm by showcasing our unique, collaborative approach between service lines we can now offer as a combined company,” Macia says. “Our diversity and experience, as well as the services offered, have expanded through the merger.”
The next step in the decision-making process is to determine whether your financials are in requisite shape to move forward. A business’ credibility often hinges on its financial statements, Roth says. Cash flow, business assets and profitability are all factors to be considered as part of determining a business’s long-term viability and attractiveness as an acquisition or merger partner.
Roth recommends that businesses with less than $5 million in revenue have at least two years of statements audited before they discuss a merger or acquisition.
At its core, any business is a collection of employees and customers. How they feel about the transaction is crucial to your bottom line. For Macia, the feedback has been positive.
“All of our employees have settled into their roles comfortably, and the combined companies have provided Stewart with an increased level of sophistication,” he says. “Since we are now a larger firm, we see more opportunities for our employees’ growth.”
When Macia decided to merge, the key step in blending cultures was effective and clear communication. The companies created a committee of employees from both businesses that was responsible for integrating cultures.
“Once the decision to merge was made, we executed an internal communication plan as quickly as we could to make sure that everyone from both teams felt valued,” he says. “It was critical that everyone understood that we were becoming a new company that would use the best ideas from both firms.”
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