Robert Macia knew he needed to make a change to stay competitive in the engineering and landscape architecture industry. The then-president of Raleigh, North Carolina-based Stewart Engineering came to a crossroads back in late 2012: He could remain independent and develop his in-house technical expertise to stay competitive in the future, or he could merge his company with longtime ally H&G Landscape Architects.
After conducting due diligence—crunching the numbers and revisiting his company culture, mission and future goals—Macia decided that the merger was the best option to accelerate his growth. The firm now has an expanded presence in Richmond, Virginia, and has more than 150 employees on staff.
As was the case with the Stewart Engineering deal, 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 these four key questions before making a decision related to a merger or acquisition:
1. How will the merger or acquisition affect your capabilities?
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 concept.
For Macia, the answer to this question was clear. The merger with HadenStanziale resulted in a more dynamic company comprised of 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.”
2. Are your finances attractive to potential partners or buyers?
The next step in the decision-making process is to determine whether your financials are in requisite shape to move forward. A business’s 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.
3. How will my clients, employees and customers feel about this 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.”
4. How can the companies involved effectively and efficiently blend cultures?
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.”