Acquisitions

Some tips to follow in the acquisition of a company

Many words could be spent on company acquisitions, but we believe that the most effective and immediate thing to do here is to give our readers some suggestions trying - among other things - to make them understand why it would be useful to be supported by a financial advisor such as Atlhas Finance:

1. Perform a thorough Due Diligence

In order to weigh the risk correctly, one should always consider the worst-case scenarios and protect oneself from them. This may seem like an obvious recommendation, but not infrequently DIY acquisitions end up neglecting it, only to run into unpleasant surprises in subsequent years, such as tax bills of hundreds of thousands of euros, obsolete inventories and so on. Falling too much in love with the upside of a deal and putting too much faith in the occurrence of the perfect situation can have unexpected consequences. A specialised M&A advisor can help you in assessing the target company, recommending the most appropriate  analyses, coordinating their execution and choosing the right professionals to carry them out.

2. Ensure that corporate cultures are compatible

Each company has its own management style, which in owner-operated companies often comes directly from the owner. It is important to assess whether the different styles can complement each other. Managers in an acquired company will inevitably feel a loss of autonomy, which can be a shock. But if this is compounded by a sense of alienation from the values and management style of the acquiring company, then the risk of tension and poor performance is high. After all, a company is an organisation made up of its employees. A company with happy employees who feel part of it is much more likely to succeed than one with disgruntled and disenfranchised employees.

3. Have your goals in mind from the start and share them

To avoid setbacks halfway through, or even worse after agreements have been signed, it is important that from the beginning each party knows exactly what the other wants. Not only both parties, but also their shareholders should know. It is important to be clear about, and to communicate, the benefits and risks of the deal, its rationale, and how the expected benefit of the transaction is to be capitalised. Without a clear plan, the deal will start to fail soon after it is concluded.

4. Leave the negotiating table when necessary

Any acquisition will be challenging, and can last from a few months to a year or more. This process will require immense dedication, preparation and attention to detail to overcome all the obstacles. During such a long journey you will end up focusing exclusively on the final goal, forgetting the goals you set out at the beginning and ignoring any warning signs. Be vigilant, keep an eye out for problems along the way and tackle them, even if it means renegotiating terms or changing the strategy or even leaving the negotiating table.

5. Engage the services of a financial advisor and an M&A lawyer

The complexity and duration of an acquisition process are such that it is detrimental to "do it yourself" and highly advisable to engage the support of professionals specialised in M&A transactions. Rarely will the company's incumbent accountant and lawyer have the expertise to handle the transaction. There will be many activities to be done, overlapping with the day-to-day administration: you will need support not only in terms of expertise, but also in material terms. A financial advisor and a legal advisor specialised in M&A will be invaluable for the management of negotiations, the drafting of contracts and the project management of the acquisition process.

6. Set deadlines and stick to them

As mentioned above, M&A processes are challenging. Setting tangible goals and deadlines will help the whole team to keep track of progress and continue with a purpose in mind. Long work days, complicated templates and various other issues are stressful, but letting deadlines pile up can derail an entire deal. Continuing to postpone its conclusion will unnecessarily increase the stress, and may give one party a reason to walk away, and the deal will be over. None of these situations are ideal and can be avoided by setting deadlines and sticking to them.

7. Hiring an interim manager to oversee the integration process

If the adaptation of cultures is so important, why leave post-acquisition integration to chance? This process is even more important than the operation that has just been completed, given the extent of the economic damage that could result from its poor execution. Entrusting the supervision of this delicate phase to an interim manager would allow to devote the right attention to it, managing the integration as a project in itself. Not infrequently, the acquired staff may lack the right skills to operate in a new system. In this case, it would be necessary to train the management on the characteristics of the new system, and make them feel part of a larger team instead of being isolated. To avoid problems, the imposition of inappropriate controls or new organisational structures with a divisive effect should be avoided. Low-level employees should be made aware of the increased opportunities for advancement and should be provided with an appropriate work ethic. These steps, and many others, taken under the guidance of an interim manager will help a smooth transition that will benefit the whole integration process.

8. Make an effort to listen actively

This advice is particularly important at the beginning of the integration process. Certainly, training the acquired staff will help, but there will be difficulties. If you devote time and effort to actively listen to the concerns in your new company, you will lay the foundations for a healthy relationship in the future. Problems need to be addressed by recognising them early and dealing with them effectively rather than brushing them aside and allowing them to fester.

9. Building repeatable integration

Once it is over, review the whole process of acquisition and integration. Identify the aspects that should be improved and the processes that worked best. In this way, as you perform new tasks, you will become more and more efficient in managing this game, and better able to deal with unforeseen events.

10. Develop a method to find interesting deals

If your strategy of growth through acquisitions has been successful, you may want to develop a good system for identifying new opportunities while avoiding competition. From a buyer's point of view, competition is a bad thing because it will inevitably drive-up prices. Build up networks from which a flow of potential targets can arise. Ideally sellers should be aware of your interest in the acquisition before they even start to consider selling.

We do not wish to be exhaustive with this brief exposition, but we hope that it will be useful to you if you are faced with a company acquisition process.

Our advice is, of course, to delve further into the subject, and to be assisted by a specialised advisor such as Atlhas Finance, who could not only guide you in the best possible way, but would also relieve you of a considerable part of the extra work that an acquisition process entails and that adds - and exacerbates - the ordinary activity.

If you would like to contact us to discuss your expansion project through a business acquisition, we would be happy to meet you, and of course we guarantee complete confidentiality.