1. Be brave but cautious. Fortune favours the brave, but it also admires the cautious. Purchasing a company can greatly increase your turnover, but it can equally put you at financial risk. Keep your momentum up, but consider every stage of the transaction carefully.
2. Appoint advisers. Optimising the benefits of the acquisition and limiting the risks are the primary roles of your business and legal advisers. Appoint your accountants and lawyers early on – preferably in the initial stages of considering acquisition as a strategy.
3. Fully understand your own business position. Early appointment of advisers helps you with the vital task of understanding your business as it exists today. For a start, are your finances healthy enough to undertake the transaction? If not, what sources of capital are available? Is your business case for acquisition sound?
4. Identify the ideal acquisition. With full understanding of your existing business, draw up criteria for what you’re looking for in an acquisition. What will bring benefit? What will bring risk?
5. Research the target business. Once an attractive target has been identified, your advisers can set about examining it thoroughly. Due diligence is the process of gaining a full picture of the acquisition, particularly any hidden issues. Your offer price is largely based on the results.
6. Protect your investment. Transactions that fail prior to purchase can eat your speculative capital. But transactions that fail post-purchase can bring your existing business to its knees. Your legal advisers are there to structure a deal that limits your risk going forward.
7. Reduce tax. The tax aspect of the transaction is a business cost that can be reduced. Again, your advisers will be able to structure the most efficient deal to limit your tax liability.
8. The importance of culture. Too many transactions focus on the operational side of the new business and fail to identify the staff culture. After all, once the dust of the deal has settled, only the people can make it work. Is the culture of the new business compatible with your own?
9. Plan. If your offer price is accepted, immediately set about planning the seamless and optimised integration of the businesses before the official handover date. Any disharmonies discovered post-handover will dramatically reduce your productivity and profit.
10. Assemble a staff task force. To facilitate handover planning, assign a team from your own staff headed by a competent project manager. Be proactive, methodical and keep on top of the paperwork. Most importantly, make tough decisions early on – particularly those that affect staff members.
Ian Gibbon is a corporate finance partner at Alliotts chartered accountants and business advisors. Contact him on 020 7759 9393 or at firstname.lastname@example.org. Chris Wilks is head of corporate at law firm SA Law. Contact him on 01727 798083 or at email@example.com.
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