Acquisitions - A Buyer's Guide

A prospective purchase must fit within the overall business strategy. The strategic plan might be to move into new markets, for instance, or find ways to increase market share.

Is the plan to acquire a well-established, successful, cash-generative operation to bolt onto the business; or is it to be opportunistic in looking for a distressed business with a potentially depressed purchase price to match?

Ultimately, the key to success is being very diligent about how much you should pay, and on what basis. Deal structuring to mitigate risks is imperative.

Forecasts of cash generation and profit must be realistically grounded, especially when it comes to servicing and repaying any external funding for the transaction. A detailed review of recent key performance indicators in the business is vital. It is wise also to build in significant  headroom to the projections.

A systematic due diligence of the target business is always essential. Any buyer must make sure there are no unforeseen liabilities - look out for pension commitments, in particular - and that working capital is properly funded. Sellers may "window dress" their numbers to make the performance of their business look as good as possible.

Of course, completing the deal isn't the end of the process - it's just the start. There needs to be a clear, concise plan of action in the first three months (often called a “100 Day Plan”) to make sure the acquisition is smoothly integrated with your own business.

There's a lot to absorb: learning about the operation and personality of the business, managing the concerns of the staff, as well as the expectations of customers and suppliers who may want to change their terms of trade.

It's complex. Even after the most straightforward acquisition, I can't tell you how often I've heard people stand back and say: "Nobody told me it would be like this!"

If you would like to contact us regarding mergers or acquisitions, please email website@najudd.co.uk or telephone 01908 698760.