Achieving growth through strategic acquisitions can be an effective way to enhance the profitability of your business. Particularly, if you use your business resources to accelerate the growth of the companies you buy. How do you tackle this?
Formulate an acquisition strategy
A good acquisition strategy is the basis for growth. And it helps you to determine what type of companies you are going to look for. In addition, it is particularly important for these companies to be able to accelerate after you have acquired them. You can do this by making your in-house techniques available to the acquired company. You can also allow the acquired company access to your markets and customers. However, it is advisable to check out beforehand whether you have the necessary internal capacity to achieve the envisaged synergy. Because, of course, an acquired company must not be allowed to undermine your own company.
Set criteria for your target group
Not every company is suitable for you and your organisation to acquire. For this reason, it is important to set criteria that the target company must be able to satisfy. The kind of company, for example. The size of the company, the location and the sector also have a bearing on this. On the basis of these criteria, look for a number of possible candidates and analyse whether or not they are suitable.
Evaluate the company
Always enter into discussions with the first selection of companies to see whether they fit into your strategy. During these discussions, you can try to find out whether these companies meet your requirements.
Exploratory discussions also offer you the opportunity to gather more information about the company. Last but not least, you can also assess whether the company would be receptive to a far-reaching collaboration or takeover.
Determine the value
Is a company receptive to acquisition? If so, it is time for a value assessment. A valuation analysis will help you to identify the value of the shares of the company. A well-used method is the DCF method, the Discounted Cash Flow method.
Start the negotiations
After carrying out several valuation methods, have you determined whether the company has enough potential? Then it’s time to start up the negotiations with an opening bid, determined on the basis of the valuation analysis. If you agree upon the acquisition price and other matters, then you set these out in a declaration of intent.
Never forget, the due diligence investigation
A very critical moment during an acquisition is the due diligence investigation. You will then – under certain conditions – be allowed to inspect the accounts of the target company. You should be aware that if you do not carry out a due diligence investigation, you can never recover any losses from the selling party after the takeover. The purchase agreement can now be drawn up on the basis of the results of the due diligence investigation and the declaration of intent.
Draw up the contracts
Have any insurmountable risks come to light during the previous steps? If not, the final contracts can be drawn up.
Conclude the deal
All the details have been discussed. The funding has been arranged. The deal can be concluded. Your management team and that of the acquired company will now need to discuss as quickly as possible what the internal organisation will look like from now on.
Do you need professional support?
A professional party with experience in this field can contribute to a solution for a proposed acquisition. Are you looking for a company to acquire? Or are you perhaps on the point of selling your company? Get in touch and let us know how we can help you. You can find our contact details here.