Buying a Business

The decision to acquire another business is not one to be taken lightly – there are too many examples of acquisitions gone awry, and evidence from public transactions indicates that all too often value is eroded not built.

Nonetheless Acquisition can provide a very effective strategy to build critical mass in a business, and become more attractive to larger predators.

Typically an acquisition involves the following stages:

• Review of acquisition strategy. This involves a critical review of the strategy, as well as refining the brief.
• Research, identification and qualification of suitable targets.
• Approaching potential targets. Being close to the market is critical to ensure correct timing of an approach – ideally to a target that is already known to be considering exit.
• Valuation and negotiation. This can be very time consuming and it is important to know what prices are being paid in the market, as well as carrying out proper analysis of returns based on anticipated cash flows.
• Raising finance. It is still possible to borrow to make an acquisition, but gearing levels have fallen substantially, and borrowing is more expensive and difficult to obtain.
• Agreement of Heads of Terms
• Due Diligence (DD). This should include legal, financial and commercial elements.
• Negotiation of Sale & Purchase Agreement (SPA). Legal documentation.
• Project management including liaison with tax, due diligence and legal teams
• Pre and post acquisition planning

You should aim to know at the outset exactly what you are going to do post acquisition. The acquired business will be expecting change and if this opportunity is missed whilst examining what you have bought, it may be much more difficult at a later stage.

Prism keep a close eye on transactions in our chosen sectors and can assist with some or all stages of the process. The fee structure is flexible depending on the assignment.