Part 1: All beginnings are difficult? Not with the right preparation and planning
If you open the relevant (trade) journals, corporate transactions are mainly reported in connection with mergers & acquisitions (M&A) by or between large companies. However, corporate transactions involving small or medium-sized companies hardly receive any public attention.
However, they still take place and even make up the majority. If you look at the figures, it becomes clear why: 99% of companies based in Germany are small or medium-sized enterprises. They generate more than half of the added value, provide almost 60 percent of all jobs and around 82 percent of company apprenticeships. Politicians also like to use these facts for advertising purposes. Who hasn’t heard the oft-used slogan: “SMEs are the success factor of the German economy”?
M&A has arrived in the everyday life of SMEs
Small and medium-sized enterprises face the same challenges as the large companies mentioned at the beginning. They need to ensure a solid equity base, steady growth and the maintenance of international competitiveness, to name just a few of the factors. There is also strong pressure to digitize. Small and medium-sized companies can (and sometimes must) meet these growing economic challenges with appropriate M&A measures.
In addition, these companies are often still owner/family-run and the company owners are often faced with (unregulated) succession issues. In contrast to large companies, there is generally no procedural and organizational infrastructure or staff units for the strategic measures required in many cases in the form of corporate transactions. Time and financial resources are limited. At the same time, however, for the reasons mentioned above, M&A is increasingly becoming part of everyday life for SMEs.
Taking all of this together, an M&A transaction often represents a major challenge for small and medium-sized companies that is often almost impossible to overcome with the available resources.
M&A situations are always new, but manageable.
There is no such thing as a “typical” M&A transaction. The personal and entrepreneurial (life) situations are too complex for that. Nevertheless, careful planning and preparation, including the involvement of external (specialist) advisors, should always take place at the beginning of such a process to ensure a structured approach and implementation and help to optimize the success of the project, if not make it possible in the first place.
It is advisable to draw up a checklist in cooperation with the shareholders, managing directors, specialist employees and external (specialist) advisors and to divide the process of an M&A transaction into the following phases: (i) preparation and contract initiation, (ii) due diligence, (iii) contract negotiation and subsequent signing, (iv) closing, (v) integration and post-closing measures.
Although these measures are initially somewhat more complex, they help to reduce the complexity of the overall process and make workflows more manageable.
Outlook
This series of articles provides small and medium-sized companies with an initial guide on how a transaction process can be structured and successfully mastered. To this end, the following articles will present the key topics in the context of an M&A transaction in a compact and practice-oriented manner. The next article deals with the topic: “Due diligence” and answers the basic questions: “What is it? Why do I need it? What do I need to consider?”
Do you have questions about the typical challenges? Please feel free to contact us.
The author and your usual contacts will be happy to answer any questions you may have!
Christian Schon
schon@tigges.legal
+49 211 8687 284