The steps toward finalizing an acquisition or affiliation will differ depending on the degree of integration involved. A basic road map for moving forward is provided below.
Initial Actions
- Engage legal counsel. Regardless of the degree of integration you seek, all acquisition and affiliation approaches can raise legal issues involving antitrust, fraud and abuse, and other state and federal laws and regulations.
- Approach/engage your potential partners.
- If your organization seeks to be acquired by another organization in a competitive process, it may engage an advisory firm that will seek detailed proposals from potential acquiring organizations.
- Less fully integrated affiliation models may be initiated through conversations between leaders of the potential partner organizations, often with the assistance of an advisory firm.
- Consider the need for a confidentiality agreement in early discussions with potential partners.
- Commit to going forward.
- If a merger is involved, the parties will likely sign a letter of intent or memorandum of understanding on the proposed merger.
- Depending on the size and market impacts of the acquisition or affiliation, a Hart-Scott-Rodino premerger notification filing with the Federal Trade Commission and Department of Justice may be required. The deal will not legally close until the federally prescribed waiting period has expired or the government grants early termination of the waiting period.
- State/local laws and regulations may also apply.
Due Diligence
- The degree of due diligence required will vary by approach. A merger will require the greatest extent of access to books and records to confirm the financial viability/desirability of the acquisition.
- “Cultural” due diligence is also important. If there are significant potential cultural incompatibilities between organizations, their chances of working effectively together, whether as a merged entity or as collaborative partners, can be significantly diminished.
Internal Communications
Rumors and gossip that can spread among staff in any acquisition or affiliation strategy can easily delay progress or derail the activity altogether. Once your organization has committed to moving forward, it is critical to inform staff on possible impacts of the acquisition or affiliation activity. The two PowerPoint template tools below outline key discussion points in fully integrated and less than fully integrated acquisition and affiliation models.
Tool: Communicating with Staff: Full Integration
Tool: Communicating with Staff: Less than Full Integration
Business Planning
While due diligence proceeds, the management teams of the partner organizations should develop:
- Vision statement
- Organizational structure
- Capitalization plan
- Governance model (powers, roles and responsibilities, reserved powers, voting rights, etc.)
- Management structure (including, in the case of a merger, the transition team)
- Early initiatives and priorities
- Financial projections (including scenarios related to the rate of movement towards value-based payments)
Final Agreement
The partners should now be ready to negotiate their final acquisition or affiliation agreement.
Use the following scenarios to see how different organizations might work through the steps toward an acquisition or affiliation.
