| The
PSI Opportunity is...
A
newsletter series exploring the process
of successfully acquiring and integrating
compatible companies into the PSI family.
In
This Issue...
We
will define the difference between mergers
and aquisitions and give an overview
of the process and steps involved. Acquisition
transactions, while complex, are simpler
to under- stand when the process is
broken down into its basic components.
About
PSI...
PSI
is a 2,500 employee geotechnical engineering,
construction materials testing and environmental
services firm. Over the last 25 years,
PSI has grown into an industry leader
primarily through the successful acquisition
of more than 80 companies. Currently,
we are one of the largest and most
successful firms in our industry.
PSI
has 125 offices across the
U.S.
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Over
the last decade, merger and acquisition activity
has become increasingly commonplace for professional
service and consulting firms. This includes the
consulting engineering and environmental service
marketplace where the trend for consolidation
is increasing. As an owner or principal of your
firm, it is important you understand the merger
and acquisition process and have a plan to react
to an opportunity when it arises. Understanding
this process and being prepared will allow you
to make the best decisions for you and your firm.
The
terms "merger" and "acquisition"
are often used in tandem and sometimes synonymously,
although they really are two distinct types of
a corporate transaction. A "merger"
is a combination of two or more companies either
through the pooling of interests, where the accounts
are combined; a purchase, where the amount paid
over and above the acquired company's book value
is carried on the books of the purchaser as goodwill;
or a consolidation where a new company is formed
to acquire the net assets of the combining companies.
Strictly speaking, only combinations in which
one of the companies survives as the legal entity
are called mergers. Thus, consolidations are technically
not mergers though the term merger is commonly
applied to them.
An
"acquisition" is one company taking
over controlling interest in another company.
The assets or the stock of the seller are purchased
for cash and/or stock of the buyer. The buyer
is definitely the dominant party in acquisition
transactions. A stock purchase would allow the
seller to continue to operate as an independent
entity. In an asset purchase, the seller's identity
as a separate entity is eventually changed, usually
being transitioned over time. Most of the transactions
PSI participates in are acquisitions where PSI
acquires the assets and ongoing business of the
seller.
Often
times, sellers (in some cases with buyer support)
will call the transaction a merger for marketing,
client and employee relations reasons even though
the transaction is technically an acquisition.
Sellers may believe there is a stigma or negative
connotation attached to the fact they sold and
seek to soften the message by using "merger."
PSI has found that terminology (merger or acquisition)
is not as important as the information that is
clearly and promptly communicated to clients and
employees. Clients want to know whether the management
or technical servicing of their projected business
will remain intact and whether services offered
will remain the same or improve. Employees are
concerned with the "me" issues, how
the deal will impact them, and what their future
holds. These issues are addressed and discussed
up front and questions answered.
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