Date
04 Apr 2023Category
Corporate Finance Services, Buying a businessThere has been an increase in merger and acquisition activity over the past two years with some real investment in SMEs. There are also a number of more debt burdened businesses, some of which have been propped up by government support measures. When done right acquisitions can transform a business' potential and unlock new possibilities for the future.
In our latest insight, we look at how a buyer should approach an acquisition, from identifying a target to day one after the sale, and what to do if any problems arise.
Initially the buyer needs to identify what they are looking for in a prospective acquisition, whether that’s expanding into a new geographical region, or acquiring a business that offers a new service. The buyer then needs to collate a list of businesses to target based on what they identified in the first step. It can be a huge benefit to have an advisory team of experts on hand, not only at this stage for their help in gathering lists of businesses to target, but throughout the process to help deal with any issues that may arise, as their experience will serve well.
Once a prospective business has been found, building a rapport with the business and the people who work there is important as spending time with them before discussing a potential deal will help with understanding how their business works, their communication style, and their objectives. This will assist both sides in deciding if the acquisition will work for them.
Some key things to understand at this stage are:
Generally, the sellers will remain with the business for a few years, but it’s important to look at the strengths and weaknesses of the person that would eventually be taking over from them. Understanding the people dynamics, the goals of each individual within the business, how an acquisition is going to impact their lives and careers, and how they are going to view the opportunity to come and join is really vital to assisting with a decision to go ahead with an acquisition.
When researching potential businesses to acquire, bear in mind:
The most important consideration is how the business and the people will mesh with the buyer’s views and culture, because it comes down to people if the deal is going to be successful.
An acquisition shouldn’t be made without a plan being in place for what the buyer wants to achieve upon completion of the deal. There needs to be people in the business who buy into the sale and share the long term vision of the business strategy.
A stable management team is key to keep the existing business going because everything that is done on day one after the sale is about being consistent with the new teams that are coming in, with staff being the top priority. Ensuring there is someone tasked with managing the process to make the integration a success and help deal with the change will also help
If there are issues which were identified during the due diligence process, then it’s best to discuss this with the people who are running the business and come up with a solution. It's not necessarily something which will stop the deal from happening if it's an isolated piece of the business and not endemic.
If you have any questions in relation to acquisitions or would like to discuss your specific business’ circumstances and the potential options available to you, please get in touch with a member of our specialist team or your usual Azets advisor.
