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.
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.
With every acquisition, there should be a team of experts ready to make things work. The ideal team is made up of: –
These people will also help determine what stays and what goes.
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.
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:
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.
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.