Buy Side Acquisition Advisory: Why You Need an Expert

May 20, 2022

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Your success rate in acquiring a company depends on your expertise in handling valuations, negotiations, and analysis. The process takes time and challenges often occur. However, hiring a buy-side acquisition advisory expert will save you time and money. In addition, you will have access to different company acquisition methods that can be tailored to suit your preferences. Read on to learn more about the Buy Side Acquisition process. 


1. Creating a Strategy 

It is necessary to devise an acquisition strategy consistent with your business model—this ensures that you identify and apply the proper criteria when reviewing potential companies. You can collaborate with a buy-side acquisition advisory expert to evaluate your ideal candidates based on operations capability, management, sales volume, cash flow, and additional factors


2. Developing a List of Companies 

Finding suitable targets is a crucial step in acquiring a business. Ensure you understand your company strategy and the reasoning behind the acquisition search. Identify feasible company targets based on a criterion that meets your acquisition strategy.


3. Contacting the Target Companies

Contacting your targets is the most crucial part of the acquisitions process. That initial contact can make or break your prospects for success. It is best to have a third party, specifically your acquisition advisor, make contact with potential target companies. This is how you get the door opened so you can learn more about the prospective target. 

If the target agrees to share information with you, you will sign a non-disclosure agreement.


4. Gathering Information

Because the company that you are targeting is private, you must request information. You will want to review financial statements, gain an understanding of the target, and its operations. Gathering and evaluating this initial information will allow you to structure an offer.


6. Presenting an Offer

It is vital to have an idea of your preferred company’s dynamics before presenting an offer. Use the information you gather to decide which of your acquisitions targets is most appealing. Follow that with making your offer known, but ensure it is in the ballpark to the seller’s price—not a derisory figure. 

Your advisor will help you craft a Letter of Intent (LOI) to negotiate and outline the scopes you would like addressed and how you plan to undertake the due diligence. If your offer is attractive, the seller will contact their attorney and/or investment banker to review your letter. You should receive a response in a few days to allow you to conduct due diligence.


7. Undertaking Due Diligence 

As excited as you may be to close the deal, investing time and effort in the due diligence phase is vital. Evaluate the targeted company through operational efficiency and determine its value creation. Your feasibility study should look at:

  • Legal due diligence: It helps you assess the legal risks associated with M&A ownership, licenses, products, and more. 
  • Operational due diligence: It ensures your business plan can fit into the target company’s operation, policies, insurance, structure, and more. 
  • Financial due diligence: It determines the company’s financial stability by looking at its revenue, transactions, customers, and more. 
  • HR due diligence: It helps you understand the company’s staff compliance, culture, policies, agreements, benefits, and more.

Based on your findings, back out if the company is unviable to buy or merge with yours.


8. Sealing the Deal

Closing the deal will depend on findings from the due diligence and pre-deal information shared. Ensure you manage the integration process to capture the expected value, while mitigating risks. If you have concerns, revert to the company’s owner, and discuss the next steps. 

If both of you agree, close the deal with the help of a mutual attorney. The agreement will be like the LOI but much longer and also legally binding, with details on how the company will transfer ownership certificates to you.


9. Post-merging Integration 

Post-merger integration is a continuation of the acquisition process. It seeks to find how the acquired company’s functions fit your firm. This requires an understanding of the merger and acquisition process to ensure your company’s continuous improvement and maximize its value. 

Sometimes sellers hire intermediaries to represent them, putting you in a tight spot in the negotiations. If you need expert help on valuation and strategic advisory or mergers and acquisitions, contact Justine to discuss your options.

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