Are you considering an acquisition to rapidly grow your business and increase wealth?
While it can certainly be a smart move, one industry commentator actually said “ahhh.. So this is how the big kids do it [grow quickly]… after their first acquisition”, there are potential landmines you need to be aware of. An acquisition gone wrong can leave a business in a far worse position – or blow it up entirely!
The most common landmines that turn dreams of multiples tripling overnight into rubble are actually often easy to identify (if you know what you’re looking for) and even use to your advantage during the deal-making process.
Failure to lock in the value of the business prior to transfer, unclear agreements with staff, cashflow problems, a history of disputes, and a lack of any registered intellectual property are our top 5 red flags.
Forbes Australia recently covered these in more detail: read the full article here!
BUT… These issues don’t necessarily mean a deal dies – they can be addressed, and thorough due diligence helps to identify them early on in the deal-making process.
If you do find one (or more) your deal team, which should include an experienced commercial lawyer, will help you evaluate the impact on the acquisition, and develop strategies to address them. If you do choose to proceed with the acquisition, it’s important to approach the deal with caution (even consider whether insurance is an option) and ensure the sale structure reflects any additional risks accordingly.
If you’d like more on how to work through due diligence, prepare for an acquisition and fortify your business as you grow, check out Joanna Oakey’s latest book, Buy Grow Exit.
If you are after some helpful resources – here’s our most popular picks for business owners upskilling on the knowledge front.
🎙️The Deal Room Podcast: be sure to subscribe to hear the latest tips, tricks and traps from buyers, sellers and brokers.
