insights
Will Brexit make it hard to buy British companies?
Analysis by Bloomberg suggests it is becoming more difficult to raise debt against sterling income, thus negatively impacting M&A in the UK. However, there are other factors to consider.
One of the most popular items with the audience at our Business Growth Strategies seminars has been “acquisition ‘dos and don’ts’”. Some of these were actually given by our own clients, based on their personal experience of undertaking an acquisition. We have pulled together the top 12 business acquisition dos and don’ts.
What should you definitely do, or definitely avoid doing, at each stage of the business acquisition process? Between our team of experts and our past clients, we have pulled together their 12 top pieces of advice.
1. Do set out your strategic reasons for making the acquisition. This isn’t a decision to make on gut alone: challenge your reasons, get a trusted second opinion, and write them down.
2. Do some mystery shopping by visiting the target’s website, making an enquiry or posing as a customer. The more you can learn about the business at this stage, the better.
3. Do talk to the target’s customers to gauge if their relationship is with the business as a whole or just the current owner. This will inform your assessment of the company’s value as an acquisition and could prevent you from investing in a vanishing client base.
4. Do be sensitive and take time to build a rapport with the owner. The better the relationship, the better negotiations will go later down the line.
6. Don’t take the business at face value. Think about how it could change and grow under your management.
5. Do suggest that you sign a Non-Disclosure Agreement. NDAs show the target company that you’re serious and it will help you get the information you need.
7. Don’t be put off if the seller has unrealistic price expectations. It’s common for sellers to initially overvalue their business, but this doesn’t mean they can’t be reasoned with. Remember – they are emotionally invested in their company, but in the end, the numbers should speak for themselves.
8. Don’t forget about the human aspects. Consider the vendor’s values and motives. Ask yourself whether they are genuinely interested. What realistic alternatives might they have?
9. Don’t get too attached to the target. Remain objective and work with an M&A adviser and corporate lawyer who will challenge you on the key points. You can make smarter and stronger choices with a level head, and if you are genuinely willing to walk away.
10. Do be diligent about due diligence! Get the professional help you need to do it right. A commercial financial advisor will have worked on many such acquisitions and will know what you need to consider. Remember: you need to go further than just financial diligence – you need to check every aspect of the business.
11. Do get the existing staff on board and make sure you retain the talent you need to get the most out of the acquisition. Earning staff trust and making sure that they feel that their jobs are secure is paramount.
12. Don’t assume that you know best. Staff from the acquired business can provide a useful point of view, and listening to them will help you to get them on side. Remember – they have been in this company longer than you have!