MBOpartners

ABCs of Acquisition - Things to consider when planning and executing an acquisition

Well planned is said to be halfway done. In a business acquisition, however, it is not enough, as problems may arise along the way, to which even a good plan will not provide answers. We’ve listed below things along the acquisition process that are worth internalizing when planning an acquisition and keeping in mind throughout the process.

a) The owner and board of the company draw up a strategy that concretizes the company’s growth plan and identifies any customer or competence gaps that need to be addressed. Let’s make it clear why an acquisition is a better option than organic growth.

b) At the beginning of the process, it is important to assess your own resources and secure the interfaces, meaning mapping out concretely how the company to be acquired will be integrated both operationally and administratively. It is also important to designate the person(s) responsible for the process.

c) It is also beneficial to secure the financing of the acquisition in time. Experts know how to find the most cost-effective solutions for a company. The financier evaluates the project based on forecasts of profits, balance sheet and cash flows.

d) In addition to explaining to yourself why an acquisition is the best option for growth, you also need to consider how the seller will benefit from the acquisition. What is the story of the company, and what does the acquisition offer the seller?

e) Next, the mapping of purchase targets will begin. Sufficient information about the targets should be gathered before the first contact. In addition to the financial figures of the companies, it is good to find out the organizational structure of the company and to get acquainted with the company’s operations and values.

f) Mapping and contacting purchase targets is time consuming, and it often makes sense to turn to professionals to approach these target companies. Experienced experts know how to help at all stages of the buying process and make the process much easier for the buyer.

g) The negotiation phase and the subsequent letter of intent can take months to complete, so it is important to carefully document all the issues discussed in the negotiations. It is impossible to estimate the duration in advance, so this step requires patience. Negotiations create trust between the buyer and the seller.

h) The next step is due diligence (DD) inspection. It is advisable to connect the responsible persons of the purchasing company to the inspection and minimize the parts done by third parties, if the buyer has sufficient expertise to perform the inspection. The inspection covers e.g., an economic, fiscal, and legal audit of the target, an analysis of the market and competitive situation, and an assessment of future prospects and possible synergies. DD provides a good basis for taking over the company.

i) The purchase process does not end with the signing of the purchase and sale agreement (PSA). The integration of the acquisition (e.g. staff adaptation, coordination of systems) is an important part of the success of the acquisition, so the persons responsible for the acquisition must devote sufficient time for the integration. In many cases, it is justified to hire an experienced rental manager or expert for a temporary period to manage the takeover and the start-up of merged operation.

MBO_Partners_logo_vaaka_valkoinen_1

MBO Partners Oy
Salomonkatu 17 A
00100 Helsinki

[email protected]
www.mbopartners.fi

Contact information