Purchasing a company is a viable way to expand your business or even become an entrepreneur. The process begins with strategic planning and ends with a successful takeover of the purchased company. The presence of an expert from the beginning to the end of the process helps to clarify the objectives of the purchasing process, streamlines the progress of the process, and simplifies its completion by assisting in the takeover the purchased company.
The owner of the company and the board, together with an expert, should first draw up a strategy that sets out the company’s growth plan and any shortcomings or deficiencies that the acquisition seeks to address. At this point, it should be clarified why an acquisition is a better option for an acquiring company than organic growth in this case.
The planning also involves securing the interfaces of the purchasing company. This means a concrete mapping of how the company to be purchased will be integrated, both operationally and administratively. At this stage, it is important to designate the responsible personnel and their responsibilities for the process.
It is also worth planning financing for the acquisition at an early stage. With the help of an expert, the most cost-effective solutions for the company can be found. Financiers evaluate the project on the basis of profit, balance sheet and cash flow forecasts, so the expert’s contribution is also significant in creating reliable forecasts.
Of course, the need for financing does not materialize until the end of the purchase process, but its planning and mapping will help to illustrate the amount of financing available, and thus limit potential purchase targets.
The owner must consider and outline clear criteria for selecting target companies. Sufficient information must be obtained about these companies before contacting them to ensure that the company is suitable as part of the buyer’s business. In addition to the financial figures, it is beneficial to find out the organizational structure of the target company and to get acquainted with its operations and values.
It is a good idea to rely on the help of an expert when mapping and contacting purchase targets, as this is often a time-consuming step in the acquisition process. An experienced expert is able to take into account the most important factors when choosing target companies and ask the most important questions when approaching these companies.
The negotiation phase can take months, depending on the interests of the parties. The negotiations aim to build trust between the buyer and the seller, and to reach a comprehensive agreement on the key details regarding the purchase of the company. The aim of the negotiations is to move forward with a letter of intent setting out the main terms and conditions of the trade, the timetable, and the conditions for the completion of the trade.
At the negotiation stage, it is very important to be very careful and to accurately document all the issues that were discussed in the negotiations.
After the letter of intent, the purchase target is subjected to a thorough due diligence (DD) inspection. The DD audit carefully examines the financial and tax situation of the acquiree as well as the legal commitments. In addition, the market and competition situation are analyzed, forecasts are made for future prospects and potential synergies arising from the transaction are assessed. A DD inspection often requires the help of an external expert, but it is a good idea for the company to involve its own responsible persons in the inspection, as the information obtained from the inspection provides a good basis for the takeover.
The signed PSA does not mean the end of the purchase process, but the transition to a very important takeover phase. The successful integration of the purchased company is a significant factor in the success of the whole purchase. The integration covers e.g., staff adaptation, coordination of systems and possible reorganization of roles and responsibilities. The persons responsible for the takeover must reserve sufficient time for the integration to take place.
In many cases, it is justified to hire an experienced rental manager or an expert for a temporary period to manage the takeover and start-up of the merged operations.
Interested in expanding your business or becoming an entrepreneur? Contact us.
MBO Partners Oy
Salomonkatu 17 A