How to best position your business for acquisition

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Acquisitions are often somewhere on a business owners’ mind, whether it’s a strategic goal to acquire a business for expansion, or a founder is ready to move on and complete a buyout ahead of their new venture.

Over the past months, the impact the pandemic has had on the economy has caused some businesses to suffer financial hardship. Some owners have been requiring support from other companies, or for some, the change in lifestyle may have simply put work as a lesser priority.

Chris Hird, associate partner at Haines Watts has been advising on acquisition deals for years, acting as the arm around the shoulder of businesses owner-managers right the way through the process. Chris guides his clients through a series of steps that can be taken to position a business for acquisition.

Preparation

A clear strategic plan for an acquisition shows potential buyers that you’re serious and methodical, giving them confidence that all aspects of the acquisition will run smoothly. The preparation period may be a lengthy one, but by focusing on the seemingly minor details you are ensuring that your business is sellable. During the preparation process, it is a good idea to conduct an internal audit to assess all the internal operations and details. An audit should be seen as tool, rather than a chore. It can highlight any discrepancies that need to be smoothed out before selling.

Cleaning up

Businesses often tend to approach acquisition quickly before there has been a chance to fully prepare accounts for external review. A potential buyer is looking for a business that has its books in order. Cleaning up never means changing figures to appear in a more positive light. It’s about making sure any out-of-date assets are settled and having a solid figure that truthfully indicates the businesses current financial position.

Announcements

When approaching an acquisition, it is useful to publicly announce any significant client wins that represent a boost in revenue, and to publicise existing high-value contracts with long-standing clients. This attracts attention ahead on an acquisition and indicates to any potential buyer that the business is sustainable. They will be looking for a guaranteed future revenue stream with an established roster of long-term clients.

Resolve any legal and tax issues

Any business strategy should be built to avoid any legal and tax issues, and to deal with them effectively if they ever crop up. Ahead of starting the acquisition process, all outstanding legal and tax issues must be fully resolved. If these are quashed before approaching potential buyers, it makes for an easier and more attractive deal for buyers to commit too.

Update your business plan

When approaching acquisition, your business plan should be amended to predict the years ahead for any potential buyer. Working alongside your core team and trusted business advisors, you should do this with the same attention that you would if you were remaining at the business. The updated strategic and financial plans effectively act a pitch to potential buyers, showing them what they stand to gain from completing the acquisition deal.

Discussions

When everything is in order internally, it’s time to open up discussions to people outside of the boardroom. Talking to the people on your team that know the business the best, or even your most loyal clients, will give you the chance to take on board any positive or critical feedback. A serious buyer will not solely focus on you the head of the business while they investigate the deal but will want to gauge how the business is perceived by a range of stakeholders.

Acquisitions are not a simple process to deal with logistically or mentally. It can be a long and daunting process, particularly if it’s your first buyout. For many entrepreneurs, they cite some of the biggest learning curves of their careers as being part of mergers and acquisitions.

What makes the acquisition process as manageable as possible, is having the right business advisors by your side. Your business advisors should understand and share your goals, and act with your best interest at heart throughout the process. It’s the people you have around you that will prove instrumental to the success of an acquisition.

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