Is now the time to consider an acquisition?
With some degree of ‘certainty’ returning to the political landscape, business confidence is beginning to return and there is an expectation that the number of business acquisitions are on the increase.
Whatever the economic landscape, businesses will always look to increase market share or differentiate themselves from competitors and often the quickest way to do this is through acquisition.
Our key considerations to contemplate in view of a business acquisition:
Starting with a strategic review of your business will identify any gaps and/or opportunities to focus on that will add the most value to the future business. Setting appropriate acquisition criteria is key at an early stage to focus on what really adds the most value to your business.
Review of the market
A thorough review of the market is key to identify all potential ‘target’ companies that fit your acquisition criteria. A review of customers, suppliers and competitors can often be a useful start. The most successful acquisitions add another angle to a business offering, rather than just increasing the size of the business.
The most successful acquisitions add another angle to a business offering
Both time and money can often be wasted if valuation is not agreed early in any negotiations. When a target has been identified ensure price expectations of the vendors are not significantly different to those of the buyer.
Typically, business acquisitions are either a share purchase or a ‘trade and assets’ purchase. These may be owner managed businesses or the divestment of a division from a large group. Each has its respective merits and pitfalls to look out for, and tax implications must be considered throughout an acquisition.
Understanding how an acquisition will be funded plays a pivotal part in the success of a transaction, together with the ability of the combined business to continue trading without having significant working capital constraints. Where external finance is required, there is a plethora of funding options available in the market ranging from traditional bank funding to secondary lenders and specialist asset finance providers.
A focused approach to due diligence ensures that the key risks are identified early in the process, and any issues identified can be considered before completing the deal. There are various streams of due diligence including financial, legal, taxation and management. These provide buyer comfort over the information that has been made available by the target, verifying that the business is what the buyer believes it to be.
Post-acquisition integration should be a key part of the acquisition planning process. Key areas to consider post acquisition are the integration of people, systems, financials, customer and supplier relationships, branding and the effective management of the external market message.
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