Acquisitions allow businesses to grow rapidly,
leapfrogging ahead of the competition. By assimilating a business that’s
already functional, a company saves the time necessary to build up units from
scratch.
Big Tech offers the best example of this with
juggernauts like Facebook acquiring Instagram and Whatsapp.
However, acquisitions aren’t a sport reserved
for big corporations. Businesses of all sizes can benefit from picking up
know-how, infrastructure, and clientele through purchasing a company.
Bringing a successful acquisition to fruition
requires taking the right steps to ensure the desired outcome.
1. What’s the Why?
Putting things in writing often gives business
owners a clearer perspective. While acquiring a business may seem like the
right move, the importance of defining the reason for the acquisition and the
ensuing strategy cannot be overstated.
Purchasing an existing company has to make
more financial sense than building up a separate brand. Does the targeted
company possess enough value to justify its acquisition?
Going into the acquisition process requires a
predetermined strategy so that costly mistakes can be avoided.
Acquisitions are a product of negotiations and
there are many intangibles to consider. Having a strategy places boundaries on
the sacrifices that should be made on the part of the acquiring entity.
Ultimately, the purchaser needs to know why
they are acquiring the business. Is there a trade secret or specific assets
that will offer synergies to its status quo?
2. Putting Together a Dream Team
Acquisitions require a wide range of
expertise. A business owner cannot possess the knowledge or focus to
micromanage the entire process.
Competent professionals in each field need to
be a part of the acquisition team for the deal to go smoothly.
A financial and tax analysis should be the
responsibility of an accredited accountant. Legal matters need to be overseen
by a lawyer that specializes in the subject matter.
Insurance, marketing, and technology experts
may be necessary for properly assessing the opportunities and risks.
3. Doing the Proper Due
Diligence
Are there any skeletons in the closet that may
come back to haunt the acquiring company? After the signatures are placed and
the deal is complete, it’s too late to complain about underlying issues
regarding the acquired company.
That’s why the acquisition team needs to
scrutinize every aspect of the target business.
4. Securing Financing
Financing has the potential to be the
bottleneck in any acquisition. Without the necessary capital, negotiations
won’t end in a positive outcome. An option such as small
business acquisition loans from Lantern by Sofi allows for flexibility in
obtaining liquidity.
Businesses with less-than-stellar credit can
still obtain financing by weighing their risks. As the experts at Lantern
state:
“One option is to
offer a large down payment along with collateral or a personal guarantee. You
may find a lender willing to accept just one of these additions or you may need
to extend all three to get approved.”
course, is that you could lose your personal assets if you default on the loan,
so it’s crucial to weigh that risk against the potential for return.
5. Integrating for Success
Like a transplanted organ in a human body, the
health of the new business entity that arises depends on integration.
With the proper planning, the two companies
that are now functioning as one should work seamlessly. From employee interactions
to information technology integration, the post-deal reality of the company
needs to be coherent.
Ensuring a Methodical Acquisition
By spending time planning and hiring the right
experts, the acquisition process can go smoothly and offer economies of scale.
From securing capital to examining the target company’s history, all details
contribute to a profitable deal.
