Four Ways Corruption Derails a Successful Merger and Acquisition
In describing the aspects of a successful merger and acquisition, a recent report details what doesn’t work with an M&A. One of the items they listed that really jumped out at me was the “Corruption.”
The report, which was prepared by Tompkins International, described Corruption as: “The balance sheet and/or the profit/loss statement are not what they appear to be under closer scrutiny.”
Now you can read this statement any way you want. You can think that some owners intentionally manipulate their financials. Many probably do. But there are also a fair number that have “corrupt” balance sheets and may not even realize it, which ultimately imperils their chance for a successful M&A.
Here are four reasons why this happens:
1. Printing owners don’t know how to read their own financials. Only 25% of printing owners understand their financials. An owner may have wisdom in terms of processes, management and marketing, but unless they can really understand and identify key data in their own financials, they’ll be unable to spot any signs of corruption on their books.
2. Printing owners don’t hire a competent CPA. Whenever I enter into an executive coaching engagement with a client, the first thing I ask is, “Who is your CPA?” I’ve seen countless examples of owners refusing to hire a qualified, experienced person for the job, or refusing to go with an established accounting firm. Price is usually the big, and unfortunate, sticking point. Yet it always winds up costing more in the end when you skimp on this essential position.
3. Printing owners don’t expect litigation. A wise man once gave me a good piece of advice. For every strategic move you make as an owner, you should always be prepared for some sort of litigation. Whenever you write a contract, create a resolution method. Chances are, nothing will happen. But if you have that mindset, then you’ll approach your financials with greater care.
4. Printing owners don’t value the power of people. Look at all of the above reasons. They’re all people-related. Whether it’s your own skills, or the people you hire, understanding the human element always winds up on your bottom line. Ensure your talent pool has integrity, and your bottom line will as well.
Accept that the buck starts and stops at the top. As financial guru Lee Rust says, the most common failing of companies is “a lack of adequate internal financial controls.” Improve your own knowledge, and keep corruption off your books.
(Photo by RDECOM)
Click below to see how Rock LaManna's S3 Solution is helping small and mid-size businesses take advantage of big-time strategic moves.
Rock LaManna provides executive coaching for printing owners looking to grow their printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan.