16-17-mergers.qxp 22/4/09 16:59 Page 17
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ANALYSE THIS and a simple common currency of
As Lloyds TSB and HBOS show, it is vital ordinary shares adopted.
to conduct proper diligence in any merger. Expect to see many more private-to-
Fortunately, most small businesses aren’t private mergers, and from these,
hiding toxic problems on their balance exciting large new companies
sheets and the hidden nasties, if any, can be emerging. To reiterate: these deals
identified quickly. The focus can then be on are not signs of weakness, but strong
fixing the how to combine the separate teams to get teams recognising that now is the time
problems the best out of each side, and to create a to build and invest together for the future,
outweighs any common culture to grow the combined when the cycle will turn once again
advance that a business over the long term. to acquisition-mania. ■
cheap price can deliver.
In my experience, private-to-
“These deals are not signs of weakness, but strong teams
private mergers can be very successful and
a great way of complementing strong recognising that now is the time to build and invest
organic growth with further oomph. The
together for the future”
secret to making these mergers a success
is for the management team to have a
clear understanding of the critical metrics Pricing in a private-to-private merger
in the businesses, knowing what could can be tricky, but in essence it comes Simon Cook is the CEO of venture capital
be improved through best practice and down to a relative discussion of what firm DFJ Esprit and has been involved
where problems lie. each side brings; it is not necessarily with the UK venture capital industry since
Once merged, people from both sides about bargains, although sometimes 1995. He has been involved with a number
work together in close integration teams one side is more driven to merge than of Europe’s most successful technology
to successfully combine the different the other. Proceeds are usually in the start-ups. His past successes include
businesses into one culture. This is form of shared equity in the enlarged Cambridge Silicon Radio, Virata, nCipher
vital not only for internal cohesion, company and that way, the interests and KVS. Previously Simon was a partner
but to make sure there isn’t any disparity of both sides are aligned for long-term with Elderstreet Investments and a director
in the quality of service to customers success. The complex structures of at 3i in Cambridge.
and clients. preference shares are best swept away
Mergers & Acquisitions 17
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