5 common fears business owners face when considering M&A

March 2020 – Stefania Gaggini, Senior Analyst, KNET Project

When considering an M&A operation, as part of a growth or exit strategy, You, as a business owner, might feel unsure and concerned about going down this path for various reasons.

This will be especially true if you are an SME lacking a clear understanding of the M&A process and the implications of being involved in an M&A operation. And even if you do have experience and know the M&A process, it is completely understandable that there are fears going down this road. I mean, at the end of the day, it is your “baby” we are talking about.

Some of the most common fears that business owners tend to have relate to:

  1. The fear of the unknown: not knowing what will happen in the future (meaning in the long-run) can be a font of stress and anxiety. This concern is completely understandable and owners want to feel reassured that the life of the business after the sale or acquisition goes the way it was planned.
    1. For example, a business wanting to sell its majority stake to a larger organization might fear that post-deal synergies will not reflect the value of the transaction, and that the business was better off before the deal. 
  2. Concern for the future of employees: many business owners worry about what will happen to the employees and the organizational structure during and after a deal. For example, entrepreneurs fear that if they open their business to a PE fund, the fund will want to make changes that affect employees.
  3. Disruption and time consuming: business owners also fear the disruption that an M&A process might cause. For many entrepreneurs the process is simply too time consuming.
  4. Trust and confidentiality: on top of this, business owners might feel a lack of trust on giving out specific information about financials, business structure and legal documents, which is completely understandable since these types of information are extremely delicate.
  5. Unreliable counterpart: Last but not least, there is the fear that when trying to sell or buy a company, the counter part will be unprepared and walk away. 

All of these uncertainties are legitimate. But it’s also important to stress that it is not all bad. In fact, M&A deals can be a great opportunity for future growth of a business. Choosing the right M&A advisory team can help you mitigate your concerns and walk you down the road in a smooth & transparent way.