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Corporate Finance : acquisitions |
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Acquisitive growth by its very nature should run at a faster pace than organic growth and can provide an alternative route for diversification. It is not, however, without its potential difficulties. It is important that the implications of any growth plan are carefully considered. However, it is essential when carrying out an acquisition to have a clear post-acquisition strategy which addresses all of the appropriate action steps, milestones and most importantly apportions responsibility. It is no exaggeration to say that many acquisitions are seen as failures in the eyes of the acquirer!
A typical acquisition plan should include:
- The development of an acquisition strategy
In effect the macro level strategic plan for the business. This will identify the key elements of the business as well as detailing the future direction.
- Identification of suitable target companies
Expands the strategic plan into the practical deliverable of relevant targets and how they might fit into the group.
- Assessment of suitable targets and the likely transaction price
Once targets are identified then negotiations will commence on the structure and viability of the transaction.
- Negotiation of the price and the transaction structure
The tense but key element of the transaction. In effect this stage leads to an exchange of contracts; the deal is struck subject to contract and due diligence. Usually the agreement will be summarised in a formal document; the Heads of Agreement.
- Due diligence and legal completion
Due diligence is the verification of the key facts and figures on the target. This includes accounting verification and a legal audit. Assuming due diligence is satisfactorily completed a sale and purchase agreement will then be issued and the detail of the contract is then negotiated between the parties.
- Implementation of the post-acquisition plan
This includes the payroll, administration, sales tactics and accounting systems to name but a few general issues.
The development of the acquisition strategy should also identify the alternatives to acquisition growth, i.e. joint ventures, operating contracts, trading relationships, new product development and possibly minority stake investments in other businesses. Each of these alternatives offers benefits and assists businesses to grow.
For further information contact our experts, or click for further information about selling a business, raising finance or floating your company.
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