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Consideration before business acquisition
i. Take time to get to know the seller as well as his/her business—often the most successful acquisitions result from the personal chemistry that has developed from an existing business relationship, it can make negotiations easier, simplify due diligence and provide a barometer for integration potential.
ii. Consider hiring an investment banker—the decision whether to hire a buy-side investment banker depends on your knowledge of the pricing of comparable companies in your industry, the analytical capabilities of your financial team, and your experience in making acquisitions. Bankers can greatly increase the likelihood you will be successful. Fees should be payable upon success.
iii. Don't get swept away in an auction process—Sellers often conduct an auction that can cause a buyer to lose its discipline for the sake of winning. A smart buyer sets its price parameters based on its own analysis of the targets market and prospects, and how the combined businesses w 11 match up. Sometimes the best deal decision is to pass.
iv. Pick the right inside deal leader—while acquisitions might begin with a discreet dinner between CEO's, a busy CEO is often not the best management point person for the deal. The deal leader should be a person who can tolerate legal and financial detail, is even tempered and can establish clear lines of responsibility. Often this is an Investment Banker.
v. Make sure your letter of intent is non-binding, except for binding ?no-shop provisions— a letter of intent helps identify key business points and demonstrates to financing sources that the deal is real. Make sure that it is not a binding commitment to complete the purchase without the customary buyer protections found in a final purchase and sale agreement. There should be a binding commitment by the seller to not use your offer to shop for a better deal.
marto answered the question on January 30, 2019 at 10:55
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