Mergers and acquisitions (M&A) are a part of the business life cycle that you are probably familiar with, yet even those with years of business experience may be trying to navigate uncharted and uncertain waters of a post-coronavirus era. It’s not necessarily a bad thing, but it has impacted the opportunities that businesses have for mergers, acquisitions, and global expansions. Businesses today must be deal ready at any time for these vital events that may ultimately become missed opportunities.
Below, we describe the dangers of a substandard entity management system and how you can implement one that helps your business stay deal ready at any time.
The Dangers of Substandard Entity Management
A corporate record is a system that stores entity data related to tax, legal, finance, and compliance matters. It should operate as a single source of truth for businesses, yet many are still operating with substandard entity management systems with scattered and disorganized data, which can ultimately hinder growth and lead future deals to go awry during an M&A transaction. A decentralized corporate record can hinder your business growth in the following ways:
- Delay or negate growth by masking potential opportunities
- Draw out due diligence processes
- Create deal-slowing questions of ownership and accountability
Becoming Deal Ready
Now that you understand the dangers of a decentralized corporate record and a substandard entity management system, you should take these steps to prepare for growth with a centralized corporate record. Here are eight steps to ensure you are deal ready using this type of technology:
1. Keep the end goal in mind and work backwards.
Before knowing what route to take, you will need to know where exactly you want to go. For instance, while the M&A may facilitate growth in a new area, the general counsel will need to understand any legal implications of this. Define your end goal first, including jurisdictions and industries, and work backwards from there.
2. Get people on board with a centralized corporate record.
You will need to get buy-in for the idea of a centralized corporate record by showing its relevance and importance. They may have interest in its idea but don’t understand how you plan to make it a reality. They will probably also want information on how the information will be managed and by whom. You should provide them with as much information as possible.
3. Ask stakeholders for important data.
Next, you will need important data from stakeholders, including operating licenses, signing authorities, corporate registration, and more. This will allow you to determine what new information needs to be documented and to show the necessity of a centralized record.
4. Determine your system requirements.
You will need to determine your company’s system requirements by breaking down individual growth goals and processes for how you will be facilitating this growth. To do this, especially when expanding into new territories, you will want to determine the legal and regulatory costs of entering new jurisdictions, understand how your company’s compliance regulations could change, and compare these new necessities to your current entity management system to find where it is lacking.
5. Research entity management solutions.
Once you know what your new entity management system needs to operate like to facilitate your growth goals, the research begins. You will ultimately want an entity management system that brings all of your corporate records online and can be accessed anywhere. It should have time-save features such as e-filing, automatic reports, compliance calendars and more.
6. Compare and contrast these solutions to find the best one.
It’s true that not all entity management solutions are created equal. When you do your research, you will want to narrow down to the top three solutions and compare them to one another. Like we mentioned, you will want one that is cloud-based and multi-purpose. It should allow your company to streamline the process of setting up your new entities, automate workflows, and manage important documentation from anywhere.
7. Launch your entity management solution.
Once you determine the entity management system that is right for you, the next step is to launch it. You will want to start implementing it into key areas of your growth strategy. This could include the evaluation of the regulatory and legal climate of the market of the new jurisdiction or engage with an Employer of Record. You will want to use it to conduct due diligence or to integrate a new acquired company and their records into current corporate operations.
8. Teach roles and responsibilities.
Lastly, you will want to make sure each personnel knows their roles and responsibilities in relation to the new system. You may need to conduct an intensive review of corporate records, COVID-19 era documents, stockholder information, and litigation history. You can assign these key tasks accordingly. Make sure that each person you introduce to the new system uses it 100% of the time to ensure that all documents are updated within the single source of truth.
Protect Your Business and It’s Value
At Athennian, we have helped countless businesses and legal teams like yours streamline internal processes, maintain proper management of entities, and remain deal ready for potential M&A transactions. If you would like to learn more about how we can help your business do the same, reach out to an entity management expert from our team today! We provide free, customized demos and will walk you through each feature our software has to offer.