If you are thinking about expanding through acquisition, Richmond Capital Partners suggest you consider the following steps to ensure a greater likeliness of success...
1. Set down your rationale
Is the right strategy for your business? Create a realistic strategy
for growth through a strategic review and weigh up the benefits
of an acquisition. Create an 'acquisition profile' of the business
sought.
2. Don't wait for the 'for sale' sign
Seek suitable businesses before they come on the market. While they
may not currently be considering selling, they may be open to offers.
Engage a professional adviser with industry specific knowledge,
experience and someone who will offer fees on a contingency basis.
3. Hone in on your target
Make approaches and let the target know you are serious while ensuring
discretion and confidentiality.
4. Reviewing the situation
Is this still the type of business you were originally looking for?
Use your adviser's knowledge while also conducting thorough research
on the target.
5. Is the price right?
Overpaying is a common problem in acquisitions which can affect
financing - do a thorough valuation. Be aware of the vendor's price
expectations and what is included in the sale. Get copies of recent
financial and other useful information. Conduct a thorough valuation
through your own advisers to compare it against that of the owner.
Is the deal possible? How much is it worth to you? How can you improve/add
value?
6. Put an offer on the table
Liaise with your adviser on how to present an offer. What are you
buying and how do you wish to structure the deal? How long do you
want the hand over period to be? Which key staff will you retain?
Your adviser will ask the difficult questions and negotiate terms.
'Heads of Agreement' will follow to summarise principle terms of
the deal.
7. Due diligence
This is a thorough investigation into the acquisition target covering
financial/tax matters, commercial & legal aspects, property issues,
environmental and health & safety matters, etc. A professional adviser
will reduce the stress and ensure this is a smooth process while
reducing risk. This process is essential to external funders. This
stage will also include developing your Business Plan and financing
proposals.
8. Proceed with caution
Following due diligence you can move to a "Sale & Purchase Agreement"
drafted by corporate lawyers, or renegotiate following any issues
that arose during due diligence. Your adviser negotiate any necessary
changes on your behalf.
9. Be pragmatic
How will you structure financing? Up/middle/down sensitivities should
be completed which highlights to a funder that you are commercially
pragmatic.
10. Helping the ground settle
Do not celebrate just yet. One of the major reasons for failure
of a successful acquisition is the failure to implement a post-acquisition
strategy. Additionally how will it be announced and how will employees,
competitors, customers and suppliers react. Be sensitive to cultural
differences in the newly enlarged organisation.
Did you see our full article in Onestop magazine for Print Entrepreneurs, January 2008? If not please contact us and we will be happy to supply this to you.
