Business Acquisitions: How do I acquire a business?

Introduction

Growth by acquisition is a tried and tested strategy that allows you to move into new markets or increase your existing market share at a much more rapid rate than would be likely through organic expansion. The Shaw Gibbs Corporate Finance team has extensive experience in delivering effective acquisition processes that deliver real value for the acquirer.

We are able to support you through the full process or just one of the following areas:

When to Buy?

Many factors determine when the best time to acquire a business is. Internal factors, such as the current performance of your existing business may indicate a need to take decisive action but there are also external factors to consider. For example, market conditions may lower the prices of those businesses for sale presenting unexpected opportunities which you may wish to take advantage of.

What to Buy?

Finding the right target, or range of targets is key to a successful acquisition process. We research companies on a national and international basis using carefully structured criteria to ensure that suitable businesses are found.

Once a target has been identified there are then numerous options available in determining the value of the business and the best way to acquire it. The two most common types of purchase are:

• Share purchase – Buying all or part of the share capital
• Trade and assets purchase – Buying the whole (or part of the) trade and select assets from the business

Each route has advantages and disadvantages for both buyer and seller and it is important to take professional advice – including tax advice – on this subject.

Valuation

There will often be a debate over a business’ value but ultimately the figure is decided by market forces and skilled negotitation. If there is a significant gap between buyer and seller expectations, then we investigate ways to bridge this, such as delivering some consideration now and further payments postacquisition on achievement of set targets.

Raising Finance

If external finance is needed to fund the acquisition, the finance provider will need to see detailed business plans and financial forecasts for the proposed transaction. Funding may be a mix of debt and equity and striking the right balance will be crucial to prevent a strain on cashflow. We are able to introduce numerous funders to your business and assist in putting together a funding package that enables the acquisition to move forward.

Due Diligence

In any acquisition, conducting due diligence on the target is a crucial part of the process. It can cover several areas but generally the financial, commercial and legal aspects of the target business are often examined.

The aim is not only to confirm that everything is as it should be, but also to identify areas of risk that need further negotiation or protection through the legal agreement. Where external finance is being raised, the finance provider may make due diligence a condition of the loan and may even want input to the scope of the work conducted.

Final Negotiation

During or following due diligence the final negotiations revisit the nature of the sale consideration (e.g. shares or cash) and the timing of its payment to the seller to ensure proper value in relation to potential risks is delivered. To spread the cashflow impact, some of the consideration may be deferred and paid over a period of years and, where a seller is being retained and needs to be incentivised on performance, the consideration could even be a variable amount linked to future financial performance – a so-called ‘earnout’.

Acquisition Process

Through managing your acquisition process from start to finish we free up your time to continue running your business and continually ensure that the transactions is moving forward, immediately dealing with any issues that arise and co-ordinating with all parties involved including lawyers. Our experienced professionals will see the project from initial inception all the way through to legal completion and ensure that value is delivered.

About us

Shaw Gibbs Corporate Finance advises business owners seeking assistance with mergers, acquisitions, growth & exit strategies.

We have significant deal experience, working with clients from an early stage – advising on business valuation, deal negotiation, fundraising and tax planning to make your transaction run smoothly.

With an enviable reputation as one of the leading deal specialists in Oxford and London, Shaw Gibbs can achieve successful outcomes for our clients, however complex the transaction may be.

From our London and Oxford offices we work both locally and nationwide across numerous business sectors as diverse as food service, engineering, transport & medical devices.

We are a blend of Corporate Finance Accountants, Tax Specialists and former Finance Directors, who can also call on specialist resources from other areas of our business where necessary, such as Financial Services, Payroll, Human Resources and Company Secretarial.