In modern times, the thought of companies merging together to embark on bigger projects is nothing out of the ordinary. Many startups change and expand as a way to operate everyday business. So to put these mergers into proper context, it begins with an acquisition. An acquisition is the act of buying a company with the intent to alter it or change it so it fits the way one operates business. The primary reason for doing so is to not only utilize the parts that are doing well for another company, but also to put them together with the best parts of your company.
As far as startups acquiring businesses, it could be done for several different reasons. Whether it be access to a new market or access to a different technology, a startup acquisition creates more opportunities for more growth and success. That’s right, such circumstances open the door to fresh talent, new resources, or the possibility to create new products.
However, it’s important to note that in the event a business acquisition isn’t launched well, heavy losses and broken organizational mistakes can be incurred by your business. So in order to avoid such a pratfall, here’s a quick list of how one’s business acquires a different company.
First Steps in a Business Acquisition
The steps to properly acquire a business goes as follows:
1) Create a Plan
Before you go all in on acquiring a business, look at the reasons why you’d like to acquire the business in the first place. Are you looking to:
– Acquire new personnel?
– Develop a product supplementation strategy?
– Create a market window strategy?
– Acquire advanced technology?
– Create an industry roll-up strategy?
– Find a new market?
– Have a synergy strategy?
– Increase your market share?
– Eliminate your competitors?
– Have a diversification strategy?
– Have a vertical integration strategy?
– Have a geographic growth strategy?
– Have an adjacent industry strategy?
– A plan to increase supply chain pricing power.
So after you gloss over these concepts regarding the acquisition, determine if the business you plan on acquiring is worth purchasing. See if you can get the most out of the deal, but spend the least. Then, shape such an offer around that benefit.
2) Create Your Acquisition Team
So for your plan to take off, you’ll need a team that can assume these roles:
– An executive who manages your team so that the acquisition can happen. The company CEO is oftentimes the best person to fill this position.
– An investment banker who handles the finances to make sure the company you want to acquire is worth acquiring.
– An acquisitions lawyer who has a solid understanding in regards to the transfer of ownership.
– An HR individual who will organize the new staff.
– A specialist in IT who will merge new company infrastructure.
– A PR person who will deliver and promote such information about the merger to the public.
Once your acquisition dream team is compiled, you might be ready to take on this new endeavor.
3) Due Diligence and Research
There are two different phases to this process:
– Phase One – Check all public information regarding the company as the contract is being drafted and make sure there’s no issues that devalue the company. Such information is important for negotiating.
– Phase Two – Meet with the management of the company you plan on acquiring and find out the important elements of how the company operates. Then, tour the corporate headquarters.
4) Create an Offer
If you and your team are pleased with what you’ve found, it’s time to make your first offer so that the business can be acquired. You’ll make a great first impression if you offer a fair price through a clear, positive negotiation. Since you are the one who is approaching the company to buy them, you’ll need to make an offer first. It’s important to not forget that working the merger is your responsibility.
5) Term Negotiation
Try to reach an agreement that ends well for both companies in regards to the merger. It’s important to be firm, yet not to undermine your success by being more harsh than what’s necessary for the deal to happen. Create an agreement that works for everyone and do not overpay. If it goes well, it looks as if the acquisition is in the bag.
6) Create a Contract
When it comes to negotiating, contracts are not the end. If anything, contracts make things more complicated. However, that’s what lawyers are for and they’re here to make sure this process goes smoothly. Thankfully, we have a superb business acquisition attorney staff on hand to serve you and your business acquisition. Contact us today for further information!
Source: https://weisblattlaw.com/
