When considering an acquisition, there are certain steps to take that can help ensure a successful acquisition and transition.
Before approaching a prospect
By gaining background knowledge on a prospect, you will gain a general understanding of the company and an idea of their worth and potential.
- Identify your strategic reasons for making the acquisition. It can be helpful to get a second opinion, challenge your own reasons, and to write them down. Knowing exactly why you are going to acquire your target will make sure your business decisions are grounded on firm, logical bases.
- Situate the target: visit the target’s website, pose as a customer and make an enquiry, and evaluate how they are currently operating.
- If possible, talk to the target’s customers. Try to find out whether their positive relationship is dependent on the business itself or the current owner. When making an acquisition, maintaining the current client-base is essential for success.
Making an approach
- Be sensitive and take the time to build a rapport with the owner. A relationship of trust between acquirer and business will benefit the acquirer.
- Sign a Non-Disclosure Agreement, showing the target company that you’re serious about the acquisition, and it will help you get the information you need in order to make a sound decision.
Negotiating the deal
- Evaluate the value and prospects of the business. What successes – or inabilities – do you foresee for the business under your ownership? Avoid taking the business as a ‘what you see is what you get’; consider the capacity of the business to grow under your care.
- Sellers are often closely attached to their businesses, and thus initially overvalue their business. Don’t be put off by high price expectations, this is only a starting point for negotiation.
- Consider the vendor’s values and motives; are they genuinely interested? What alternatives might they have that they aren’t sharing with you? Use your prior knowledge about the business to situate your offer and show the seller the true value of the company.
- Be diligent about due diligence! Appointing the right advisor and getting the assistance you need allows you to go further than just financial diligence and promotes future success.
After the deal
- Staff buy-in is essential in keeping talent within the business and making the transition between ownership smooth, helping you to get the most out of your acquisition.
- Staff from the acquired business can provide experience and a useful point of view, listening to them will help get them on your side and will provide you with useful information on the day-to-day of the company.
Speak to a professional
We always recommend to appoint a Corporate Finance advisor as early as possible in the process; they can help you to identify an opportunity, arrange the right funding, and make the approach. Using a Corporate Finance advisor will help you make the right decisions for yourself and the acquired business.