The M&A process has the potential to bring you a substantial return on your investment, whether you are the one buying or selling a business. However, it can also be a complex and possibly problematic undertaking, with hidden stumbling blocks and the risk of failure lurking in the background.
That said, with the right approach and some insider knowledge up your sleeve, there’s no reason why you shouldn’t be able to overcome any challenges that arise along the way.
That’s where this insightful guide comes in, providing you with valuable tips and tricks on how to navigate the most critical – and potentially difficult – parts of the M&A process. Hopefully, with the advice we are about to impart, you will be able to approach your deal with renewed confidence and certainty.
Let’s dive right in, shall we?
Mastering acquisition strategy
One of the most critical parts of the acquisition process – for buyers, in this case – comes right at the beginning, when you must map out your M&A strategy and solidify key goals, both short-term and long-term.
Having a thoroughly planned strategy is vital as it can have a real impact on the future success – or lack thereof – of your deals.
There are several factors you and your company board need to consider as you begin setting out your strategy. For instance, what kind of acquisitions do you want to make? Vertical, horizontal, concentric or conglomerate?
There are different benefits to be gained from each type of acquisition so you and your board must think about the specific goals you want to achieve from your M&A activity and the resources you have available.
Some key questions to answer include:
- Do you want to reduce your operational costs?
- Expand into new markets?
- Bolster your supply chain?
- Diversify your revenue and your risks?
The answers to these questions will inform which kind of acquisition you embark on.
By taking the time to carefully map out your acquisition strategy you place yourself on a firm footing right from the start of the M&A process.
Getting the right valuation
The next critical stage of the acquisition process – for both buyers and sellers this time – is getting an authentic valuation.
For sellers, the importance of an accurate valuation lies in helping you set the right price for your company. Overvaluing your business and asking for too high a price will seriously hamper your chances of selling, which can cause problems if you need to sell rather quickly – for instance, for financial or personal reasons.
For a buyer, having your own valuation of a business carried out can help you ascertain what amount of money is fair to pay for a company. One of the most common mistakes buyers make during acquisitions is to overpay, and this can be avoided by having a valuation carried out by a reliable third party, such as a business broker.
Neglecting your due diligence
Arguably the most critical part of any acquisition for buyers is due diligence. Getting this stage of the M&A process right is crucial, as it will ultimately inform whether you proceed with the acquisition or not.
During due diligence, you will gain insider insights into the operations of your target and hopefully also be able to get a pretty accurate indication of how they will perform in the future. You will also be provided with an invaluable opportunity to uncover any potential red flags that could make them undesirable. These red flags that you should look out for include:
- Falling profit margins
- Falling customer base
- High rate of staff turnover
- Cash flow volatility
- Legal disputes
- Over-reliance on certain customers or suppliers
If you do uncover issues of this kind they may not necessarily be a deal breaker for you, depending on their severity and the possibility of resolving them, but they can give you leeway to negotiate more favourable terms.
On the other hand, you may feel that the target is no longer as suitable as you thought and you can end the acquisition process here and move on to another target.
It’s important not to rush the due diligence process. After all, you will have a lot of paperwork to pore over, as well as many crucial aspects of your target’s operations to consider – from their tax liabilities and sales performance through to their growth projections, data security and organisational structure. You need to make sure they will be an asset to your portfolio rather than a liability, so take your time and don’t be afraid to ask questions if you have concerns about anything you uncover during due diligence.
Paving the way for positive post-sale integration
How you handle the integration process following your acquisition is just as critical as how you oversaw the business of making the deal in the first place.
With a worryingly high number of M&A deals failing to live up to their potential, it’s vital that you orchestrate as smooth and straightforward a transition as possible. This is not only for your own benefit, but to ensure that your new and existing teams, customers and suppliers are kept happy and given good reason to stick around.
Planning and preparing is key if you want a stress-free integration. It can help to break the process down into 5 main stages: preparation before the first day, day one, the first month, the first three months, and the first year.
Draw up a list of tasks and objectives that need to be taken care of during each of those stages, and make sure everyone is on the same page about what needs to happen and how they can help.
Having a detailed integration checklist can work wonders when it comes to making this essential part of your acquisition journey a success.
Why you should hire a business broker
As you can see, the M&A process has several critical moments that require diligence, patience, flexibility and a strategic approach to master.
If you are feeling a little daunted at the prospect of navigating these crucial stages, never fear – you can hire the services of a business broker to get you through the deal-making process successfully!
Business brokers like Harris Acquire have a wealth of experience and expertise when it comes to buying and selling businesses and they can provide you with comprehensive assistance every step of the way, thereby optimising and streamlining the acquisition process.
This ranges from sourcing and vetting targets to conducting valuations and assisting with due diligence. They can also offer insider insights and advice on how to handle integration successfully, placing you and your new purchase on a firm footing going forward.
Final thoughts
If you’ve decided that this is the year to embark on an acquisition to unlock new synergies and expand your market reach, then why not get in touch? Our friendly, reliable and highly experienced team can oversee every part of the acquisition process on your behalf, helping you to maximise your deal’s value while minimising any challenges that may crop up.
Better yet, you can take advantage of our exclusive Acquisition Finder pilot that comes with a 30-day money-back guarantee.
To find out more about this pilot, and our comprehensive services, don’t hesitate to call 01926 757100 or email Hello@harrisacquire.com and we’ll be in touch right away!
