WHY BUY A BUSINESS
There are numerous reasons for growing your business through acquisition. It can give you the opportunity to diversify the products or services that you sell, increase market share and offer access to a wider customer base – all reducing business risk. Cost savings may be possible through sharing of the overhead base, increasing purchasing power, or acquiring better or additional production or distribution facilities which can lead to greater efficiencies.
Acquisitions can enable a business to obtain quality staff or additional skills and to acquire existing intellectual property, products or services rather than having to develop these in-house.
From a defensive perspective, making an acquisition can reduce competition or prevent a competitor from acquiring a key business which could be detrimental to your own position. Finally, making an acquisition will increase your rate of growth.
ACQUISITION TARGET SEARCH & INDENTIFICATION
Our acquisition search capability draws upon the extensive networks of our senior dealmakers. We will work with you to refine your acquisition criteria and then will utilise our in-house research capability to identify those businesses that meet your criteria. These may be businesses that are being actively marketed for sale as well as those which would make suitable targets for direct off-market approaches.
Research suggests that more successful acquisitions are achieved when a purchaser has invested time and effort in a dedicated acquisition search exercise.
Our research capability allows for a wide range of targets to be identified and it is often possible to obtain a large amount of information on selected targets. The most challenging aspect of this work is to distil the information to such an extent as to make the project manageable and focused.
APPROACHING A TARGET
Of course, identifying possible targets is the straight forward part. The skill comes in the manner of the approach to the target business, the courtship and the positioning of the acquirer as a credible partner. We have an enviable track record in creating enduring relationships with our approach.
The important issue is who to approach so that you get to the key decision-maker as soon as possible. Buyers may have reservations about making a cold approach to a target – we have no such reservations and can add credibility to the approach. The “buffer” of an adviser between parties is a recurring theme throughout the acquisition process.
Once a relationship is initiated we then work closely with our client to identify the most appropriate strategy for developing it further. We may be centre stage or we may not, depending on our judgement on how best to further our client’s interest. Patience is important as it may take several weeks, months or even longer to understand the nuances of the target business and to establish the right rapport with its management and shareholders, before discussions can move on to the terms of a deal. Many opportunities are lost through purchasers failing to understand fully the benefits that the acquisition brings or the motivations of the sellers.
Having established contact, and explained the rationale for the interest it is important to progress matters. An initial information request should focus on those areas most relevant to valuation and compatibility with the strategy for the acquisition. It is important to assess all information received from the target with that obtained from other reliable sources.
The objective is to check that the business has no obvious major problems before making a firm offer for the business.
STRUCTURING THE NEGOTIATION
At the right time we will structure a proposal which fits with our client’s requirements while also being mindful of the needs and expectations of the seller. It is important to remember that not all of a seller’s needs are financial and so meeting their other objectives can go a long way to finding terms agreeable to both sides without the purchaser paying more than is necessary or appropriate.
When there is broad agreement on the scope of a deal we can negotiate headline terms and draw up heads of agreement – a summary of the agreed deal which ensures that there are no misunderstandings and which, typically, also covers exclusivity arrangements. There is a fine line between tactical negotiation and creating mistrust and misunderstanding and that is where our experience comes in to get the best deal possible for you while bringing the other side along with us.
Many business people have made long and successful careers from being good negotiators. It is surprising therefore, as to how poor those same people can be when negotiating their own transaction. It is an almost inevitable truth that a transaction in which you have a significant personal stake becomes a personal transaction.
Whilst we are motivated to complete a successful transaction for our client we bring a degree of dispassion to negotiations that allows for clarity of thought and a level-headed approach.
Once a deal is agreed we then work with you to plan your detailed due diligence requirements, which may include identifying any particular risk areas, selecting professional advisers and agreeing their terms of reference, and managing the process so as not to create unnecessary tension between buyer and seller. As well as financial due diligence, you also need to also consider other areas where comfort may be required including commercial, technical, operational, legal, tax, environmental, pensions, and insurance. Not every deal requires every aspect, and some elements can be carried out by the purchaser in-house rather than by external advisers.
It is common for issues to be identified in the due diligence process and it is therefore vital that a cool head is maintained when considering the implications of these and planning how and when to raise these with the seller without setting unnecessary “hares running” but ensuring that they are appropriately addressed. Be firm over the issues that have arisen and evaluate the impact they have on the agreed deal. Do you still want to progress? Does the price need adjusting? Does what you are buying need amending?
During this phase the legal process will also commence and we can assist in the appointment of legal advisers and, where appropriate, recommend firms experienced in the size and complexity of the transaction being contemplated and assist with terms of reference.
In the final phase of an acquisition we work closely with all of your advisers, assisting with the commercial aspects of the deal as they impact on the legal agreements and liaising with you and your legal advisers on apportioning identified or potential risks between buyer and seller through negotiation of warranties, indemnities and limitations on these.
We are genuinely interested in the success of our clients and look forward to a continuing relationship, whether following an MBO or corporate acquisition, as strategy develops and the next step on the road to success is already being planned.
Our team has significant experience of acting for overseas companies making acquisitions in the UK, of UK companies making acquisitions overseas, and even of entirely non-domestic deals where both parties are outside of the UK.
We are more than comfortable contacting senior executives anywhere in the world and, rather than being tied to or reliant on a single international network with its inevitably inconsistent coverage, quality and professionalism, we will in most cases make direct approaches ourselves and avoid the use of middle-men, or we will use the most appropriate intermediary for the specific circumstances. Our tenacity and motivation to succeed for you are vital ingredients.
ACQUISITION OF A PUBLIC COMPANY OR A COMPANY SUBJECT TO THE TAKEOVER CODE
In circumstances where the target company’s shares are tradeable on a share trading platform, or such a facility has been in place in the past ten years, or no such facility has existed but the company is a public limited company, then the acquisition will be regulated by the Takeover Code.
Some corporate finance advisers will recognise the significance of this but few will understand the precise implications and be able to assess the actions required as a result. We have the skills and expertise to guide you through the Takeover Code aspects, including assessing the most appropriate way in which to approach the opportunity in terms of minimising the risk of costs being incurred without a successful conclusion. We frequently work for non-UK acquirors looking to buy in the UK.