A Focus on Our Business Acquisitions Service

Independent research shows that a substantial proportion of acquisitions fail to meet the purchaser’s expectations and a material number completely fail to meet the original purpose. Strategic planning and proper due diligence are intended to help move the odds in your favour, as unplanned opportunistic acquisitions are often unsuccessful.

Finding the right business, at the right time and for the right price is very difficult and may require a lot of preliminary research as the small business sector is diverse and fragmented and suitable targets meeting your criteria may be hard to find.

As acquisitions can be frustrating, it becomes all too easy to compromise on key elements and acquire a business that simply happens to be available, rather than persevere for the right business that meets your original objectives.

The purchase negotiations must be driven by your original objectives, with a realistic assessment of its value to you so the deal is not concluded at any price.

Initial Acquisition Considerations

The prime objective of all acquisitions is to add net value to your existing business, so the target business must not be over-valued and is acquired on the best possible terms with the right legal paperwork to support the deal.

A methodical approach with substantial planning, time and effort is necessary to achieve success, and your acquisition parameters should be defined clearly from the outset including type, size, location, funding and price.

Key points to consider are:

• Will the target business add clear strategic or financial value to your existing business?

• How does it tie in to what you are already doing?

• How healthy and sustainable are its core markets?

• What differentiates it from its competitors?

• Why is it being sold?

• Is its profit record and trend sound & sustainable, and can you improve on it?

• Is there a good unrealised future potential which you can readily unlock?

• What is the quality of the customer base? Can it be improved on?

• Are there any adverse external factors outside the owner’s control?

• Is there good second tier management?

• What capital expenditure may be required in the near future?

• What is the workforce like? Can they meet your needs for the future? What are the potential redundancy costs if they can’t?

• What costs can be cut out without compromising profitability?

• Do you need the premises?

Any negative points arising from the initial investigation should be carefully assessed. They may not be deal breaking but should influence the overall acquisition decision.

How do the answers stack up against your original purchase criteria? And be honest with yourself on this one, would you have looked at it if you had known what you now know at the very beginning?

If you wouldn’t, why aren’t you walking away from the deal now? And let’s face it, just because you’ve invested a lot of time & effort to this point isn’t a good reason to buy a business that isn’t going to work for you.

After all, you’ll almost certainly then spend a lot more time, effort & money in trying to turn a duff business round. The risk then is that you take your eye off your existing business and that will then under-perform in its turn, demotivating your existing key staff whose own remuneration may be tied to its success.

Peter Taaffe
Principal