Prism’s Top Ten for Business Acquisition
An Article by Prism’s Peter Watson
Getting the right team together to make an acquisition, and ensuring good communication between client and advisers, is key. There are many traps for the unwary and Peter, Director of Corporate Finance, has set out his top ten tips below:-
1. Know what you want
Generalist searches rarely result in acquisition. The better you define the target, the easier the search.
2. Ensure you have enough resource
Acquisitions are very greedy of management time. Ensure that you are able to devote the time needed to your existing business.
3. Don’t underestimate the geography
For smaller acquisitions it is essential to be able to manage them day to day. If this involves more than a couple of hours drive it may prove rather difficult!
4. Create a war chest
You may be able to structure a deal to minimise initial cash, but don’t count on it. Cash is king and this is understood by sellers. You need to have your financing in place from the outset – and don’t think that the banks will come to your aid!
5. Get to know the management
The first meeting will tell you more about the likelihood of the deal being a success than 100 emails.
6. Build trust
For the seller, the process of selling a business is a very stressful. You need to have built sufficient trust to overcome the inevitable hurdles that will present themselves.
7. Agree a process for Due Diligence
An initial meeting with all parties and advisors to discuss the process of due diligence will pay dividends. Much time can be wasted with the haphazard provision of information.
8. Explore the customer relationships
For most businesses the customer relationships hold the key to value. Ignore these at your peril.
9. Ensure structure is appropriate to the risk
Whilst cash is king, you can use the structure to address agreed risks.
10. Know what you are going to do! 100 day rule.
The first 100 days after acquisition are key. You should aim to use the time to implement all the major changes, not just “getting to know the business”. It will be too late by then.