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The business landscape in the UK is strong, despite financial crises in the form of rising wholesale costs and a consumer cost-of-living crisis. Even as overheads spike in cost, businesses are holding firm, with some well-poised to profit well.
As the owner of a small, growing business, you may be looking further ahead than the next few months, looking to secure your business’ future in your industry. There are few better ways to do this than via the acquisition of new businesses. But acquiring a new business is a risky endeavour, and a complex process. Here are some simple steps you should take in the process of acquiring a business.
Choose Your Target Company
Firstly, you need to decide regarding the company – or kind of company – you’d like your business to acquire. There are many factors to consider when choosing a viable company to acquire, many of which can have complex interrelationships with one another and your existing business’ overall goals and growth strategy. In short, your target company needs to be a good fit within your business model and needs to be robust enough in its growth to be a valuable and reliable long-term investment.
As well as these broad-strokes compatibility questions, you need to ensure that the target company is in a stable financial state. This includes examining any liabilities they may have in the form of contracts, existing contracted workforce and even debts. With a clear and comprehensive idea of your target company’s overall operation, from short-term cash flow to assets and beyond, you are in a stronger position to consider purchase; without knowing these things first, you could find yourself walking into the sunk cost.
Build an Acquisition Team
Amid your business discovery phase, you should also be building an interdepartmental team with the specific purpose of examining and administrating a potential acquisition. By pulling leading team members from different areas of your business together, you can seek to build a grounded acquisition strategy – and also get a more nuanced picture of the kind of target businesses that would work most practically with your long-term vision.
You should also make space for input from independent advisors. Retaining the services of professional business and tax consultants allows you and your acquisition team to build a more objective picture of any potential acquisition, and how the transaction would look for your business in the short and long term.
Prepare Acquisition Finances
With a robust post-acquisition strategy well-vetted and in place, you can now safely work towards freeing up the finances and funding necessary to carry out an acquisition. Unless your business is uniquely cash-rich, it is highly unlikely that you’ll be acquiring any company with an outright cash purchase; instead, you’ll be shoring up your purchase with asset-backed loans or investments from stakeholders.
Approach the Target Business
With a concrete understanding of your target company’s health, value and assets, and your funding sources secured, you can safely approach with a ballpark offer in mind. An acquisition is not merely a transaction, though. It is an ongoing process, with important negotiations including the security of the target company’s workforce, the protection of assets and, naturally, the price.
