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It may sound callous but, because of the current state of the economy, now might be a good time to pick-up or sell a distressed snow and ice management business. After all, handled properly, mergers and acquisitions (M&As) allow the acquiring business to acquire another operation under favorable terms that is a good fit, and that might not otherwise survive.

A M&A transaction can also mean helping a troubled business survive without the owners or shareholders completely losing what they’ve built up over the years. Equally important, a M&A can save the jobs of workers.

Although more than one snow removal business has gotten into trouble in a M&A transaction, acquiring smaller business usually limits much of the risk. Plus, there is now insurance to further reduce the potential of risk, fraud or misrepresentation.


Mergers and acquisitions are similar in nature, but they do have a few major differences. Mergers combine two separate businesses into a single new entity. True mergers are uncommon because it’s rare for two equal businesses to mutually benefit from combining resources and staff.

Unlike a merger, acquisitions do not result in the formation of a new business. Best compared to buying an existing business or franchises, with an acquisition the purchased business is fully absorbed by the acquiring company. This often means the acquired business is liquidated.


Mergers and acquisitions are an efficient and effective method of growing and expanding a business without investing time and resources. Obviously, there must be a strategic fit between the snow removal business and the operation being acquired, but think of the many ways in which acquisitions are desirable such as:

  • Expanding the customer base
  • Trimming and streamlining the operation will increase profit margins by eliminating inefficiencies.
  • Acquiring a quality management team and new talent means new ideas, thoughts and mindsets that can challenge the snow removal operation’s current workers to start thinking outside the box.
  • Better customer service. Every business, regardless of size, needs to ensure customers are happy with what the operation is providing.
  • Beating the competition. A business that chooses to remain stagnant and uninterested will inevitably be overtaken by the competition.

    When the owners of a snow and ice removal business are worried about liquidity, about making payroll or paying the bills, one of the few options to sustain the troubled business or get some benefit and liquidity for it is via a M&A. Selling to a competitor, another strategic player or even a financial investor may be the only way of preserving the operation.

    Creative deal structures involving earn-outs and other forms of contingent consideration may be useful in bridging valuation gaps. A lower asking price with payments spread over many years, obviously benefits the buyer and mean a smaller tax bite for the seller.


    A key question in every M&A transaction relates the value of the business. Fortunately, much like the other terms in a M&A deal, offer price and valuation are negotiable.

    If the parties to a M&A transaction are unable to agree on an acquisition price, one solution might be a so-called “earnout” to bridge the different prices. An earnout is a contractual provision that allows a seller to receive additional consideration later if the business sold achieves certain financial metrics, such as milestones in gross revenues or earnings before interest, taxes and amortization (EBITA).

    Although an earnout can pose significant risk for the owner/shareholders of a selling business, it creates a path for the selling stockholders to ultimately receive the return they seek from the sale of their business.


    Because M&As are expensive, adequate funding is a necessity. Fortunately, financing an M&A transaction with stock is a relatively safe option for both parties since both share the risk.

    In many share-exchange transactions, the buyer will exchange their shares for shares in the business being acquired. Paying with stock is especially advantageous for a buyer, especially if their shares are overvalued.

    In a merger, shareholders on both sides can reap long-term benefits of a stock swap as they will generally receive an equal amount of stock in the newly formed operation, rather than simply receiving cash for their shares.

    Paying with cash is another, potentially expensive from a tax standpoint, alternative. After all, cash transactions are instant and relatively mess-free and usually don’t require the same kind of complicated management as stock would. Unfortunately, smaller snow removal contractors, without large cash reserves, must usually require alternative, and expensive, financing to fund their cash transaction.

    Another popular alternative to paying for a M&A with stock or cash, involves agreeing to take on the debt owed by a seller. After all, for many businesses, debt is the reason for the sale.


    Unfortunately, debt can often reduce a business’s value, often to the point of worthlessness. From a buyer’s point of view, this strategy is often a cheap means of acquiring assets.

    Being in control of an operation’s debt can mean increased control over management in the event of a liquidation since owners of debt have priority over shareholders. This can be another incentive for would-be creditors who may wish to restructure the new business or simply take control of its assets.


    As already mentioned, snow and ice management businesses enter into M&A transactions for various strategic reasons with the view to create synergies, to enhance capability, enter a new market or gain in economies of scale. But the M&A should not be viewed only from the economic point of view. It should also consider the workforce.

    M&A transactions, even smaller deals, typically involve a number of important employee and benefit issues that will need to be addressed. Naturally, any M&A may result in job losses or changes in work culture that impact on morale.

    Fortunately, much of the confusion during and after the M&A can be reduced with regular communication. Keeping the workforce updated, answering their questions and attempting to alleviate any doubt they may have.


    The various coronavirus relief measures make caution advisable. Buyers should have a good understanding if the targeted snow and ice removal business took PPP loans or employee retention payroll tax credits.

    Both parties should agree on the treatment for the loan or potential forgiveness, alone with the impact of new legislation. Plus, the business being acquired should be examined for opportunities with payroll tax deferral, qualified improvement property or losses that may be carried back for refunds under the CARES Act.

    On the downside, M&A deals are often difficult to accomplish. The interests and objectives of sellers and buyers are all-too-often discordant. The owners and shareholders of a business being acquired want the highest price with little or no residual risk or liability. Acquiring businesses, the buyers, want the lowest price possible with maximum recovery options.

    The coronavirus pandemic has had a significant n impact the on business in general and requires everyone to be realistic about how their business will perform in the new normal. The pandemic has also created a tremendous opportunity for M&A transactions where both acquiring and selling business can benefit. Naturally, expert tax and legal advice are strongly recommended.

    Mark E. Battersby is Snow Magazine’s financial writer. He resides in Ardmore, Pa.