Meeting Topic
Introduction
When small business owners think about growth, they often think about getting more customers through the door. They don’t think about acquiring a complimentary business; however, this option could be ideal for some! Read on and think about how ‘merging’ or ‘acquiring’ the right business could launch you to the next level.
Mergers & Acquisitions – Some Legal considerations Contributed by Helen Wallace
You’re a small business that’s doing well. You’ve got a great team, more work than you can handle and the business is making a tidy profit. You’re ready to grow your business. How are you going to do this? You’re thinking you could bring in another product line or extend wider into the market or hire more staff so you can take on even more work. What about growing your business by way of merger or acquisition?
Merger vs acquisition?
Mergers and acquisitions occur when two companies come together. However, the two are different. A merger is when two separate companies combine to become one company to benefit both. An acquisition is a transaction where one company purchases and gains control of another.
Any merger or acquisition will need expert advice, including accounting and legal, to help mitigate risk and to make sure the transaction goes smoothly.
Some Legal considerations
Structuring the transaction
- Are you acquiring another business’ assets or shares? (A purchase of shares carries greater risk and more detailed due diligence)
- Are you merging your business with another? How will shares be allocated? Will this be based on an independent valuation? Are you going from a sole trader to a limited liability company? (Control and decision making mechanisms are important to consider)
Due diligence checks
- What exactly are you buying? Who are you merging with?
- It’s critical to do your “DD” first!
- Due diligence is the process of carrying out an investigation and review of the important aspects of your target business before being committed to completing the transaction.
- Examples of matters to check include:
Financial – obtain copies of financial statements and accounts
Assets and Stock
Goodwill
Permits & compliance – does the company hold all consents and permits necessary to carry on its business and can these be transferred
Contractual obligations
Liabilities
Leases – are these assignable, what are the terms
Intellectual property rights – it may be crucial to obtain the rights to IP assets
Employment – existing employment agreements and staff obligations
Information Technology – what programmes and software are important
Tax – is everything up to date, any issues, tax implications of transaction
Insurance
Industry specific checks
Culture and values alignment
Claims against the business
Agreement for Sale and Purchase
- A contract is necessary to document the terms and conditions of your merger or acquisition. Important terms to include:
The parties, subject matter of the sale, purchase price and settlement date
Agreed business structure and operation
Defined assets
Conditions eg, obtaining any consents and approvals, being satisfied with due diligence checks and obtaining finance
Warranties & indemnities from the vendor regarding the state of the business
Restraints of trade
Dispute resolution provisions
Employment matters
- Existing employment agreements, key employees, obligations and liabilities
- Effect of transaction on employment and consultation with employees
- The Employment Relations Act 2000 gives employees certain protections if a business is sold
Regulatory requirements
- The Companies Act 1993 governs NZ company law (eg, is the approval of the company’s shareholders required?)
- The Commerce Act 1986 prohibits acquisition of shares or business assets that lessens competition in a market. Is Commerce Commission clearance required to avoid penalties for breach of the rules? The Act also prohibits restrictive trade practices and includes cartel provisions such as price fixing or where competitors allocate a market between them eg, based on geographical area.
- Industry specific regulations that need to be complied with
- Health and Safety at Work Act 2015
- Resource Management Act 1991
In summary, acquiring or merging with another business can bring great advantages and extend your business opportunities, but requires careful consideration of a number of matters. Input from specialist advisors (legal and accounting are essential) and can help and mitigate the risk of taking on the next big step of growing your business.
To learn more about how Helen and Corcoran French assist their clients, visit their website: https://cflaw.co.nz/
Next Meeting Topic
Introduction
Are you a monkey magnet? The article below, contributed by Glenda Lewis, explores what the heck monkeys are in business and how YOU can tame them. She provides specific examples of things you may be saying that could be making life harder for you as well as strategies to change your communication to help you get rid of the monkeys once and for all.
Do You Feel Like a Zookeeper … Constantly Managing Monkeys? By Glenda Lewis
The article title sounds like a fun hook, but it is something that happens more frequently than you realise. The idea of “Monkey Management” has been around since 1974.
So, what is Monkey Management, you ask? Put simply ‘Monkeys’ are additional tasks that jump onto your back, that you feel like you must deal with, but are not really part of your job. ‘Monkey Management’ is the process of managing these creatures.
Something that often comes up with my clients in management, is their sense of feeling overwhelmed and overworked. When I scratch the surface on this – I find that during a typical work week these managers often take on other people’s ‘monkeys’ and before they know it, they are carrying around lots of these pesky creatures on their back.
Are You A Monkey Magnet?
Being aware of how these monkeys arrive is the first step. Here are some examples of typical monkey magnet scenarios – things that are very easy to say, and which seem kind and helpful in the moment but in fact are adding to your overall work stress and workload.
- “Leave it with me for a bit…”
- “Let me think about this and I’ll get back to you…”
- “It will be quicker for me to action this…”
Try these Monkey Management Techniques:
Instead of saying “Leave it with me…”
Try saying “Let me show you how I find/research/complete xxxx, and then you can follow my process, and just bring me the finished product.”
Instead of saying “Let me think about this and I’ll get back to you…”
Try asking a series of critical questions back to the person:
- “What do you think is the best thing to do?”
- “How would this show what is possible?”
- “Knowing quality is important for us, and price is important to them, what do you think is the next best step to take?”
Instead of saying “It will be quicker for me to action this…”
Try saying “I’m happy to wait a bit longer for you to do a bit more research and learn exactly how this should be put together.”
The key here is being consciously prepared to respond to these questions as they arise. It will feel awkward at first, but it does get easier with time!
My Top Three Monkey Management Tips
- Successful delegation never involves taking a task/monkey back. If you have delegated the task right it stays with that person – you can help, guide, and check in with the person but you should never take the task back.
- Be prepared and have careful conversation tactics ready to send monkeys back home. Giving these responses initially will feel awkward but you need to stand firm, otherwise you will let the monkeys jump back onto your back.
- Clear role definition substantially reduces monkeys. If you are clear from the outset who is doing what, their authority level and boundary conditions, this will hugely reduce monkeys.
I promise that by incorporating these tips into your leadership style you will alleviate having to put on your Zookeeper hat on each morning!
To find out more about how Glenda helps her clients, book a discovery call: https://calendly.com/glendalewis/30min or visit https://www.theleadershipacademy-glendalewis.com/
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