Acquiring Other Companies: How To Do It Right

Acquiring Other Companies: How To Do It Right

Acquiring Other Companies – Growing a Business Does Not Have to Be a Solo Journey

Businesses may start slow, gradually and organically expanding in tandem with sales growth. For some, this kind of expansion maybe a little too slow for them. Hence, they resort to acquiring other companies that will benefit them and the acquired party in more ways than one. Here are some tips to help you buy another business or company to achieve success.

 

Reasons Behind Acquiring Other Companies

Before deciding to buy another company, you have to be clear about the reasons for doing so. For some, purchasing another company could mean to eliminate competition, or getting into a new market segment or even getting advanced technology. Whatever your reasons, be clear and stick to with throughout the acquisition process. In case you get more than you bargained for, take it as a bonus. Otherwise, you might lose out to your greed. Find out how the business will add value to your current company.

Acquiring Other Companies: How To Do It Right

 

Assembling the Team

With every acquisition, there should be a team of experts ready to make things work. The ideal team is made up of: –

  • An executive that ensures successful acquisition, usually the CEO;
  • An investment banker to handle all of the finances and stability of your company and the soon-to-be acquired business;
  • An acquisitions lawyer that comprehends every aspect of ownership transfers;
  • An HR expert in organizing and rearrange the staff from the new company;
  • An IT specialist to merge technical infrastructures of both companies and
  • A PR officer to inform and notify business partners and customers of the acquisition.

These people will also help determine what stays and what goes.

 

Research and Due Diligence

Here comes the fun part. Do your research about the company through its public information. Public information can tell a lot about the company you are planning to acquire. If they claim to be all rosy and splendid, this research will arm you during negotiations. Once you have exhausted all source of information, you can now make contact with the company. You might like to ask some questions like “What is their corporate culture like? Does it match yours? Are their products as successful as they claim so? Can their staff improve your company?” and many more. Visit the company and find out for yourself. Next is the documentation part. The typical paperwork includes a summary of business owner requirements, three to five years of financial data, annual review of the owner’s benefits and overview of their top clientele.

 

Preparing Necessary Documents

Now that you have satisfied most of your questions, its time to get into paperwork from your side. The following are the necessary documents you should prepare:

  • Non-Disclosure Agreement: Ensures confidential information is dealt with carefully and not shared. It also states that any information must be returned upon request.
  • Letter of Intent: It states your intention to buy the company after signing the NDA and understanding the business’s worth
  • Confidential information memorandum: Typically includes financial information, summaries of business operations and market opportunities.
  • Purchase Agreement: Both parties formalize the agreement in a binding contract.

 

Make an Offer & Negotiate Terms

If you like what you see, make the first move. Offer them a fair price and begin with a favourable negotiation. Do keep in mind that you are not buying just the company. You are acquiring the established brand, goodwill and its people. Be flexible and offer them between 75 and 90 per cent of the company’s worth. Negotiate to a price that puts a smile on both parties. Be sure also to understand why the owners make counteroffers. The more you are considerate without undermining the fair price, the better things will turn out to be. Once a price is confirmed, it is time for the most sensitive part, retaining appropriate talents. It is bound to be emotional but, try your best to keep as much talent as possible.

 

Contract Time

This is where that lawyer will be most useful, other than during negotiations. Contracts can get complicated, but an expert lawyer will ensure things go as smooth as possible. It is essential to get the agreement done right.



Posted on October 1, 2019 by Easy Buy Sell Business in Blog