Acquisitions: driving growth?
9th March, 2015
Growing a business organically, while rewarding, can take time. A good acquisition can accelerate that process, a bad one may slam on the brakes or throw you into reverse.
The key to success is preparation: being clear and honest about your objectives and your and your business’s ability to take on an acquisition.
Identify your key objectives and don’t let “deal fever” sidetrack them. We see clients pursue acquisitions to increase market share, develop supply chain efficiencies, spread fixed costs, diversify or to improve exit options.
Is the timing right? Assess whether your own house is in order. A well-run business will more capably withstand the demands of an acquisition process and also make it more attractive to sellers wishing to preserve their legacy.
At the moment, we are seeing the most positive business climate since 2007: funding for growth is back on the banks’ agenda and there is a backlog of sellers who have deferred sale since the crash waiting for more benign conditions.
How will you fund the transaction? We see many companies that have been prudently managed in recent years that now have the cash reserves and confidence to go on the acquisition trail.
Others will need to seek external debt and/or equity finance, but for a well thought-out strategy, options are available.
Finding the right target is key and choosing the right advisory team to support you will help enormously. You may be aware of opportunities in your market, but your advisory team can help you find others.
Their investigations into the chosen target (due diligence) will help ensure there are no hidden issues. Don’t lose sight of your key criteria and objectives and be prepared to walk away if they are not being met. Sharing the burden across members of the board eases the strain and should provide a good sounding board.
Part of your preparation should include post-deal integration of the new business. Change is unsettling for a work force: how are you going to qualm fears and get the best out of people.
How will you drive synergies between the two businesses?
As Benjamin Franklin said, “By failing to prepare, you are preparing to fail”.
* This article first appeared in a special supplement on the Greater Manchester Fastest 50 Awards 2015.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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