As industries consolidate, it is not unusual to see large businesses acquire a series of smaller businesses.
From our experience, we have found that having a commercial focus and streamlined process for acquiring businesses can speed up the timetable and reduce costs associated with an acquisition.
In that vein, we have put together the top 6 areas of consideration for organisations looking to embark on a process of a single or multiple acquisition strategy – to help get across the line with maximum speed and minimum fuss:
- Be prepared early
Have your advisers lined up and ready to go, and have documents prepared in advance – Although vendors’ solicitors are usually responsible for preparing the initial draft of the sale and purchase documentation, it is not unusual for larger organisations to have a set formula for acquisition and template documentation prepared beforehand. This can take weeks off the timetable in waiting for the first draft of documentation from the vendors’ solicitor. This also enables the purchaser to influence the tone of the document
- Carefully consider your due diligence approach
Undertaking financial and legal due diligence is a critical part of any sale and purchase process which can be time consuming and costly for purchasers and vendors.
But how do you avoid overwhelming a vendor with a massive list of information requests whilst managing risk appropriately when acquiring a business?
The approach taken to dealing with due diligence requests and the processing of information can have a big impact on both the time and cost required by the process, and requires a well thought out approach.
Consider the likely key risks and the potential key success factors of the target business (and its integration into your existing business – if you are buying to grow an existing business), and where possible, avoid overwhelming the vendor with a lengthy information request list for information that may be unnecessary to your needs.
As with Step 1 above, consult early with your advisers about this and other planning matters, so that they are on the same page as you from day one of the acquisition process.
- Adopt a balanced and commercial approach to the transaction documentation
In order to minimise the time period in which to negotiate the agreement, it is often best to have documentation that is balanced in protecting your rights without being too onerous on the purchaser. This often sets the tone for future interactions with the vendors, and also helps to speed along the process of the contract negotiations.
- Use timelines to your advantage
Sometimes, no matter how reasonable your approach, you may end up at the mercy of a vendor with slow professional advisers. Having a deadline in place for each step in your timeline can be of massive assistance in forcing a vendor to move swiftly.
This will also have the added advantage of minimising costs for all parties. The longer a transaction gets drawn out, the higher the likely cost in terms of adviser fees as well as adverse financial impact on the business.
- Manage internal expectations
We have seen many deals falter due to unrealistic expectations from within a buyer organisation.
Treat the purchase like other strategic decisions that are made on a daily basis in large businesses – consider whether it is realistic to expect a business the size of the one you are acquiring to have its legal documentation in perfect order? If they are not, consider what the worst case scenario is and how you can manage or mitigate that risk post completion?
Often we find that stepping back and taking a commercial approach to looking at these issues can help to provide a more rational basis for the best approach moving forward.
- Keep an eye on Integration
Often, integration of the businesses is not planned early enough – while the cut and thrust of the deal making process takes centre-stage.
However, often the post completion plan, and approach to integration can have a massive impact on the long term success of an acquisition. Plan ahead with your advisers across all business functions so everyone is on the same page as to how the acquired business will fit into your business from day one of post completion.
Aspect Legal offers a number of services to assist businesses in preparing a focussed and commercial approach for your next acquisition or series of acquisitions.
We also have a number of simple ways that you can interact with us with no obligation, including a free consultation service that provides a discussion of your business acquisition plans for the purchase of a target business.
If you are considering an acquisition or if you have any tricky questions that you need a sounding board for – just give us a call on 02 8006 0830 or send an email through to us, and we will be in touch for a free discussion.
Disclaimer: The material contained on this website is provided for general information purposes only and does not constitute legal advice. You should not depend upon any information appearing on this website without seeking legal advice. We do not guarantee that the contents of this website will be accurate, complete or up-to-date.