- Before an acquisition: What you should prepare?
- Legal Documents: what you will require during business purchase?
- What additional Services you may need
- Market Research: Why this is essential for investor?
- Due Diligence: what does it include?
- Acquisition of the Company: How long does it take?
- Transaction: what the new owner has to do immediately after the transaction?
The following items are essential and should be considered carefully if you want to get the best possible business acquisition:
- Strategy: The single most important action is to define a clear strategy with realistic objectives.
- Profile: You should create a profile or an outline of an ideal acquisition target and get some initial indications of how much such an opportunity might cost.
- Budget: You should prepare a budget for expenses associated with doing a deal
- Plan: Before you start the process, it is important to create a plan that clearly shows how the acquisition will be financed.
- Approval: You must get necessary internal approvals of essential authorities like Board or shareholders.
- Team selection: The right project team could serve the maximum results and this is why you should focus on combining internal assistance along with external M&A support.
- Formalities: study in details different legal structure and possible tax consequences, think about who will be involved in the due diligence process and where you will get legal support to draw up your contracts.
There is no doubt that having well-prepared legal documents is most essential requirement when you wish to buy a company. Below we outline the most important ones.
- The Mandate letter formalizes the agreement between the advisor and the client. The purchase process begins once mandate letter has been signed.
- NDA: Non Disclosure Agreement is made to ensure that all the information exchanged between the parties stays totally confidential.
- LOI: The Letter of Intent can be legally binding or non-binding; it expresses the intent of both parties to exchange shares or assets and describes the main terms and conditions.
- SPA: Share Purchase Agreement executes the sale of the shares legally.
- SA: Shareholders Agreement regulates ownership. The objective of this agreement is to ensure that no unexpected issues or problems arise with regard to shares, ownership and voting rights.
Our service is M&A advisory and deal execution. We aim to deliver this service with the highest quality and with the support of the best people. But you must understand that, along with this, you will almost certainly need various other services: for example — detailed market research, due diligence, legal advice, tax consultancy, industrial experts, PR, etc
Market research is a hugely important step in the M&A process. It should be designed to answer the most critical questions, including:
- Which region provides the best strategic value? What countries are most attractive?
- What is the total market size? What is the current status of the and what are the future market trends?
- How many companies are active in the region and sector and what are their key financial indicators?
- Who are the main players and what is their background?
- Which companies are for sale at the moment?
- Which companies are in financial distress or are performing poorly?
When Due Diligence is properly prepared by the seller and executed by the buyer it can lead to a rapid and successful closing of the deal for both parties.
If unexpected items come up at the late stages of closing a deal it can lead to new rounds of negotiations being started, time wasted and even the potential collapse of the deal.
In our experience:
50% of all projects are successfully closed within one year.
30% — within two or more years.
20% — never close, due to market situation, internal difficulties, unrealistic expectations or other problems. When this happens we stop searching for potential deals and in case of exclusive agreement you walk away and owe us nothing.
M&A deals often fail to realize the full synergies that were initially identified and this can threaten the business objectives. Careless post transaction integration may destroy, rather then create shareholder value:
- Develop an integration plan and start quickly.
- Share your vision and values with all the existing employees.
- Establish clear roles, titles and responsibilities for top and mid-level management teams. Consider job title changes and remuneration strategies carefully.
- People need to believe in their future, sell them benefits and value time and time again until people start to believe and can adopt them as their own.
- Set up consistent and regular management reporting systems.
- Optimize business process, knowledge networks and information flows by investing in post-deal project management.
- Draw up detailed plans for individual areas of the business (e.g. sales, operations, finance).
- Emphasize cultural similarities, challenge people from different backgrounds and company cultures to start communicating with each other and to work together with a sense of joint enterprise.