As presented in Dato’ Jasani’s keynote presentation for the Merger, Acquisition & Affiliation Seminar & Exhibition 2016 organised by the Malaysian Institute of Accountants (MIA) on 2 June 2016.

Kuala Lumpur, 10 June 2016 -- When one hears of a company being acquired, merged or affiliated with another firm or network, one can't help but assume the former has been taken over and the market being increasingly monopolized.

Such is no longer the case as companies who merge are now looking to create an opportunity to be the best of both worlds, says Dato' NK Jasani in his keynote presentation during the seminar in Dewan Mahkota, SME Corp on June 2.

Hosted by the Malaysian Institute of Accountants (MIA), the Merger, Acquisition & Affiliation Seminar & Exhibition 2016 aims to highlight the prospects and procedures of merging, acquisition & Affiliation (MAA).

As the Country Managing Partner of Grant Thornton Malaysia, Chairman of Grant Thornton Cambodia and Director of Grant Thornton Singapore, Jasani presented on the potential prospects of companies merging in a mutual agreement and the procedures that take place in order to ensure both parties understand the consequences of their merge.

“Companies which perform MAA should not be seen as a form of dominance or takeover of the market. Instead, it should be viewed as an opportunity for companies in attracting new clients, thus creating an opportunity to win business,” said Jasani.

“In this sense merging the two companies would have an opportunity to consolidate the market and position the new company to lead further in the future,” he continued.

To elaborate further, Jasani mentioned three parties that would benefit from this mergence; particularly the company’s clients, firms, and people. Clients would have an increased quality of service by benefiting from both of the merged firms. For firms, there would be greater opportunities to attract, develop and retain the talents of their staff. Firms could also share their resources, thus providing a larger access to people, technology, and capital. As for the people, there would be a greater variety of client assignments when two firms merge. This can be a positive incentive as more opportunities would help progress and achieve staff potential.

Communicating between the two parties should focus their discourse on the aforementioned factors, said Jasani. This message is essential for all to comprehend once the merging commences.

Through MAA, the merged firm can expand and thus receive various key strategies in its respective field. Jasani lists down the potential benefits for MAA in the perspective of specialists, service lines, and locations.

Service lines under a merged firm expand, and synergy and cross-sales can be achieved from the merging.

Services under the new firm can be combined and thus play a boost in branding the firm. Merging the firms will cover more ground for both sides too - an advantage when the companies have existing offices overseas.

Should two firms consider MAA, Jasani recommends conducting a meeting and discussing on the terms and conditions of such an action that would occur during the merge. There would be four factors that would be taken to consideration. First factor is the overview of the new firm’s revenue and profitability is an important factor that needs the two parties to sort out. This is followed by the firm’s ownership structure – how would the new management team look like under the merged firm? Next term to consider would be the compensation model and current levels of partner earnings. Finally, the two parties have to discuss in regards to partner goodwill and retirement benefits. 

The encouragement and results in advocating MAA can be seen in Jasani's firm, Grant Thornton. Merged with JB Lau & Co. in Penang in 2009, Grant Thornton obtained a more significant influence in the island. In terms of PLCs, Grant Thornton is the 4th largest firm there due to the merging.

In terms of staff members, Jasani pointed out the specialists and directors which Grant Thornton recruited during the aforementioned merging. From Senior Specialist to Tax Director, the MAA of Grant Thornton proved to be a success in terms of staff recruitment.

That wasn't the end of Grant Thornton’s achievements through MAA, as the firm did it again when it had acquired a majority stake for its Cambodian office from a retiring GT Vietnam Partner 3 years ago. Jasani pointed out that Grant Thornton Cambodia is now auditing is the biggest PLC there and it plays a RA role for a Malaysian Group listing its Cambodian and Laos operations.

Jasani presented the five stages of MAA procedures, whereby each stage is elaborated on how to complete and thus proceed to the next stage.

The first stage of the process aims to engage with the merger candidate and develop the strategic rationale. This is where the two parties would come to meet and discuss the rationale and reason behind this proposal.

The next step is to create a committee specializing in merging the two parties. This is where both parties would sign, calculate the earnings of each firm and come to an agreement to profit from the sharing.

The third stage involves filing a due diligence report. Confidentiality is key at this stage whereby the next stage can proceed once the report is updated and agreed on.

The fourth stage involves communicating to the stakeholders regarding the two firms merging. It is important to ensure all members are able to vote on the proposed merger as to avoid misunderstandings.

As soon as the merger passes legal completion comes forth the fifth and final stage, whereby the companies begin the post-merger integration. The financial, information technology and service lines of both companies will begin to merge while a communication plan is executed in order to inform the public regarding the changes.

In conclusion, Jasani stated that the above benefits and concepts can also be used by non-accounting professional firms – legal, engineering or medical. There too equally, values and success will arise.

 

For more information please contact:

Sharon Sung, Technical and Corporate Affairs Partner, T  +60 3 2692 4022, 

sharon.sung@my.gt.com