Acquisitions may seem simple on paper, but to make them work in the long run requires strategic thinking and meticulous preparation. Many entrepreneurs are disappointed with their latest acquisition if they that site fail to follow the proven steps to plan and implement the acquisition.
Establishing an acquisition plan is the first step. The most successful buyers have well-defined, specific value creation strategies that are incorporated into the deal, like expanding to an international market or filling gaps in their portfolio. They also have a business partner and a team that perform the analysis and negotiations, and a clear strategy to close and transition the deal.
Value and Deal Structure and Value
The next step is to determine the price at which the purchase should be made. This is accomplished by comparing the valuation methods with the financial records of the company. Examine the cash flow of the target’s predictability, market position, and systematization. Additionally, it is important to determine if the deal is an asset or stock deal and to understand the tax implications for each.
Negotiation and Closing
Through the entire process, it’s important to focus on the customer. Also, it is crucial to avoid slicing corners during due diligence or overlooking negative findings that could affect the transaction.
It is also important to have a team of knowledgeable experts to guide you through the M&A process. This is especially important during the due diligence phase where it is easy for details to get missed. Furthermore, communication with employees is essential. This can be stressful for the employees of the acquired company and it is important to openly communicate and provide transparency.