Why should management restructure a business after a Merger or Acquisition?

In this ever-changing business world, the most common news we hear is regarding company mergers and acquisitions. The UAE is considered as one of the most attractive business locations on a global scale and is also home to a large number of companies in diverse sectors. Mergers & Acquisitions are an integral part of the business ecosystem as businesses in the UAE look to achieve business growth, maximise profits, and serve customers in new markets.

What are Mergers & Acquisitions?

A merger happens when two or more businesses come together and form a single entity for mutual benefits and other reasons as effectively using the companies’ combined synergies to enhance growth and expand the foothold of the company. After the mergers, the joint entity will carry out businesses under a new name.

Acquisition happens when one company acquires another company’s ownership, which is usually a smaller company (either a competitor, supplier adding to the strengths of the acquiring company or company in a new sector to diversify the risk). After the acquisition, the acquired company will be directly operating under an acquisitor or acting as a group company with necessary rebranding.

Mergers & Acquisitions generally referred to as ‘M&As’, are very common in the changing business world. They happen due to various reasons, including exploring new opportunities, entering new markets, the next phase of growth for either company and combining synergies for a better profit and cutting costs. There are certain legal and regulatory procedures followed while proceeding with the process of Mergers and Acquisitions. Once the Merger and Acquisition process is complete, the management can focus on restructuring the business to achieve efficiency and goals.

Restructuring of Business Post-M&A

Business restructuring can be a powerful tool for the management to find new value to the combined business post the Merger and acquisition. It is an essential part of complete the process of M&A. The new entity’s restructuring includes integrating companies with different values, cultures, and forces to work towards common goals set up by the joint company’s management.

The Business Restructuring allows different functions of the combining companies to be brought together with minimal interruptions, the activities to be streamlined, and necessary targets and goals set for the joint workforce and ensure delivery by taking advantage of the combined synergies. The restructuring process includes a sound integration plan, active employee involvement, clear vision on restructuring the company’s goals, customer focus to retain the trust and restructuring different departments and may include downsizing in rare cases if required.

The company restructuring enables the business to explore synergies to become more integrated and profitable. The restructuring results may include changes in the company’s procedures, computer systems & networks, rules and legal aspects. The poor handling of change management, which is a crucial part of the joint company, may negatively impact the mergers and acquisitions’ goals and ultimately lead to failures.

Things to Consider while Restructuring Business After Merger & Acquisition

As the process of business restructuring after the mergers and acquisitions can be very long and hectic, there should be clear objectives and goals before undertaking the restructuring process. Additionally, other things need to be considered before considering the restructuring exercise.

• The restructuring team must carefully consider the costs involved in the restructuring process, including operational, legal and human costs etc., It is ideal for gauging the costs of restructuring with the profits upon the successful restructuring.
• The team should proactively understand both the companies’ current weaknesses and strengths and workaround to resolve the weaknesses and build on strengths in the new entity.
• An in-depth analysis of joining companies regarding the employees, work culture and process etc. should be undertaken. The restructuring process should consider the multiple Options while adopting work cultures, process and other in the new company as there is no perfect fit for all.
• A strong feedback mechanism shall be considered and designed by the restructuring team, which includes the active involvement of the new entity’s different departments. The necessary course correction mechanism should be in place to go ahead with the joint company’s objective and goals.

How Can We Help?

It is very important for a business to understand the current situation of the business and take steps accordingly. For this, the management should take the assistance of reputed professionals who will perform the auditing and accounting of the business.

Jaxa Chartered Accountants is one of the experienced accounting consultants with an omnipresence in the UAE. Our expertise ranges from assisting in bookkeeping & accounting to guide& helping companies with restructuring during mergers and acquisitions. Our in-house experts can help companies understand the impact on accounting and financing processes at the time of mergers and acquisition in the UAE. Please Contact Us for any queries regarding our services. We’d be delighted to help!