If you are serious about acquiring a business, you must maximise your chances of realising a successful acquisition. An extensive search and pragmatic approach will significantly increase the likelihood of sourcing and completing a deal.
1. Deal Origination on Steroids
Most business acquirers only look to source opportunities listed for sale, these are normally called ‘on-market’. Whilst in certain sectors there will be a reasonable number of opportunities available at any given time, on-market misleads as to the quality and quantity of available business acquisitions. A closer look shows there isn’t much choice of quality businesses for sale that fit your acquisition criteria.
Even if you have identified a suitable on-market opportunity, you can greatly improve your opportunity flow with ‘off-market’ deal sourcing, and this is a vital tactic for the most ambitious of acquirers. This involves finding target companies that fit your criteria, but as far as you are aware, are not currently listed for sale.
However, this is a time-consuming and expensive process. Nevertheless, the results will bolster your choices and increase your chances of buying a business.
2. Have Some Flexibility in Your Search Criteria
A search profile needs to be comprehensive and well-formulated, but there needs to be some degree of flex as it is very rare to find a business which ticks all your boxes. For instance, a good target business may be located slightly outside your target area, or its turnover may rely on a small number of larger clients. Whatever the case, you need to know where you are prepared to compromise our you may be waiting forever for the ideal and perfect opportunity to arise.
3. Get Real about Business Valuation
Once you have identified several suitable and attractive acquisition opportunities, it is important to establish a fair and reasonable business valuation. If you are approaching companies not currently for sale, you can’t expect them to accept a low-ball offer.
Business owners are likely to have varying exit plans. Some may wish to leave the company on completion, whilst others will want to stay on, at least for a transitional period. Therefore, it is important to be flexible when negotiating the exit strategy of the existing business owner(s).
4. Have Your Acquisition Funding Ready
You must havethe acquisition finance in place before you make offers. In the current climate, you will need some capital, which needs to be easily accessible. However, most transactions also have finance as a part of the mix. So make sure you also have your funders in play too, so that you can have confidence when making offers you can support the deal and structure presented to the business owners.
Failure to have the funding ready may frustrate the seller and reduce your chances of a successful acquisition, and is one of the most common factors behind why acquisitions fail.
5. Be Realistic on Deal Completion Timing
Once you have reached heads of terms, the progress through due diligence to completion will usually last between 3 and 6 months. Often, this is based on the responsiveness (0r lack thereof) of advisors on one or other side.
Whilst this process can sometimes drag out, you need to be honest, punctual and realistic regarding deadlines, when in the due diligence process. Ensure that you carry out all the investigation you need to so that you are confident that you are paying the right price for the opportunity in front of you.
Conclusion
Company acquisition is difficult and complicated, even if you have the right opportunity in front of you. As we have detailed above, to be capable of executing when it comes to company acquisition means you need to be able to commit significant time and resources to the process.
The good news is that we’re a company built for this purpose and have many clients who trust us to take the load and deliver the best target companies to help you fulfil your goals. So, if you are interested in exploring how we can assist and increase your chances of acquiring a business, contact us on 01962 609 000.
