Six Tips for a Successful Business Acquisition

Executing a well-planned strategy is the difference between your business acquisition working or floundering. Having said that, there are several important factors to consider if you want your business acquisition or merger to be successful. The fact is, you’ll need to do more than just acquire another company or business. You need a smooth transition, the right people and the right resources on board — as well as a good operating plan in place for when you take over. In this article, we will outline seven important tips to help make the transition flawless so that it does not affect your organisation adversely in any way.

Develop a clear view

What kind of company would you like to acquire? You should develop a criteria for an ideal investment and what would appeal to you out of a negotiation. Make sure to focus on your cooperative objectives and how a merger could help advance towards these goals — don’t get too distracted by financial performance! Additionally, make sure to review stakeholder expectations to ensure a business acquisition would not result in a conflict of interest. 

 

Once you have a thorough understanding of your own business, it will be easier to predict how development will affect it. When planning for a merger or acquisition, it is important to take into account all aspects of the process, such as people, established structures, and branding. By making a clear and detailed plan, you will greatly increase the chances of the business acquisition’s success. 

 

At Wilkinsons Accounting Solutions, we use our years of experience in business consulting to provide on-the-nose acquisition consultancy services and valuation. Our team of qualified finance and operational professionals will work alongside you to maximise the value of your business for a smooth business acquisition or merger. This includes forecasting and cashflow analysis to build growth plans, as well as advice on the steps required to increase business value on exit. For more information, you can get in touch with us by phone or email. 

business women hand calculating business acquisiton cost

Financial, operational and tax due diligence will help pinpoint what exactly you’ll get out of a successful business acquisition. Financial due diligence is a vital assessment of the financial health of a business. This is done by conducting a thorough investigation of the company’s past and present financial performance. Through this assessment, it can forecast the company’s economic growth and identify any potential risks. 

 

While good due diligence is costly and time-consuming, it is vital if you want to get a full grasp of what exactly you’re buying. It allows both parties to scrutinise any potential financial, operational, tax, and legal risks — this includes if paid taxes are up to date and if the future operations of the business are still viable. These assessments will give you a better insight into the business’s values — do they prioritise the products, the customer base, key contracts, or intellectual property? Is their success reliant on certain members of the staff, and how is their current company culture? These are all crucial factors to consider before closing the deal. 

 

Establish a financial model

Many mergers and acquisitions will require funding, so it is in your best interest to consider a selection of possible funding options. If you can’t depend on in-house equity, you may want to reach out to an angel investor or a venture capitalist. Alternatively, you can also consider more traditional methods of financing such as broker funding and seller financing. 

At this stage, you should be significantly aware of tax and how you can navigate around it for the best deal possible. Tax should be viewed as a critical business cost that needs to be reduced wherever possible — especially during merger or acquisition negotiations. As an accountancy firm with expertise in providing financial consultancy for businesses, Wilkinsons Accounting Solutions can offer reliable and intuitive advice for your company on how to best structure deals in the most tax-efficient way possible to minimise your liability. 

Prepare for the best negotiation

After a financial review is completed, it will support with assessing validity of valuations and funding structure for heads of terms — however, as the deal progresses, a more complex analysis is required to ensure the deal is viable based on agreed terms. You should also be considering other factors that can be negotiated — for example, escrow, survival period, and earnouts. 

 

A good business acquisition strategy will always offer some level of compromise. It is essential to target the common goals between the two companies so any conflict of interest can be resolved easier and tension-free. If the two parties have drastically differing valuation expectations, then it is important to resolve this at an early stage as it could result in greater risks later down the road — if the deal falls through, these unresolved differences will result in additional time, costs and stress for all parties. 

 

Any seller always wants to maximise their value and protect deferrals after an acquisition has closed. On the other hand, a buyer wants to make sure that the operations of the business will continue once the ownership changes hands. Therefore, it is important to maintain good relationships and information flow throughout the whole process of an acquisition. At Wilkinson Accounting Solutions, we have a thorough DD checklist that will ensure all key financial information is captured and communicated appropriately with every party involved. 

Anticipate the right moment

We all know time is precious. Neither buyers nor sellers will want to waste their time and effort on a deal that will fall through later down the acquisition process. Therefore, as a buyer, it is vital to ensure that you are clear on your acquisition strategy as early on as possible. 

This includes: 

  • Being knowledgeable in the industry you are buying.
  • Understand how you will fund the deal to assess if a business is viable for your deal structure. 
  • Pick deals that align with your growth strategies

This is why it is crucial to get expert help as early on in the process. A professional accountant will provide reliable insight and support you in getting an accurate value of the deal — this would include not only a simple profit and loss valuation but also a balance sheet review.

Business team calculationg risk of business acquisition

Stay on top of bookkeeping

It is paramount to have timely and accurate bookkeeping if you are going to sell your business. Buyers will expect ongoing information that is accurate and up-to-date — therefore if you do not have any management accounts or management reporting set up, then it will give buyers less confidence in the accuracy of your accounts. 

 

Good bookkeeping is one of the most essential areas that will help provide accurate insight into financial growth, especially during the business acquisition process. Wilkinson Accounting Solutions’s bookkeeping service provides every customer with an experienced account manager who will oversee your business’s reports and documentation according to your business model, ensuring bookkeeping is processed timely and accurately. Our service includes access to cloud-based systems (like Quickbooks), timely bank reconciliations, management accounts and detailed VAT reviews. If you have any inquiries, our team of finance professionals are on-hand to answer any of your questions. All you have to do is get in touch.

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