We continue to receive inquiries from our clients regarding mergers
and acquisitions. While we have had several clients either close
their doors or merge with other agencies, we also have a number of
clients throughout the country who are actively exploring possible
acquisitions. In our experience, there are very few actual mergers,
despite how these transactions might be labeled in press releases
or the trade press. In fact, they are really acquisitions where one
agency acquires the assets of another. If you’re on the fence about
merging or acquiring (or being acquired), here are a few tips:
" If it is an acquisition, will it be a stock or an asset
purchase? In almost all instances, we recommend an asset purchase,
where the buyer takes selected assets and no liabilities.
" Is the seller going to stay and be active in the business?
This is generally very important for a smooth transition. We
recommend that this be done through either an employment agreement,
an independent contractor agreement, a consulting agreement or some
combination thereof.
" Which GDS contract does the purchaser have? Hopefully, it is
different from that of the seller’s. Generally, the buyer would not
assume any liability under the seller’s contract, absent special
circumstances.
" How many segments are being generated through the GDS system?
This is an important issue to address. If the systems are
different, the buyer may obtain bonus payments from its existing
vendor for converting the segments.
" What increase in revenue/profitability can be obtained by
shifting business to preferred providers? This analysis should be
undertaken to determine whether the buyer can receive additional
revenue by moving business to its preferred providers.
" How long should the process take? The entire process, from
the time the agency is identified until closing, should be no more
than three to four months.
