Trade Secrets of Busines Acquisitions

Available in our e-library on M&A at IMAA!

Authors: Barrie Pearson

Publisher: Thorogood

Year: 2007, August

ISBN: 978-1854183668

Content

This invaluable Briefing distils 30 years’ experience from one of the UK’s most successful deal-makers.

“Losing a deal by adopting the wrong tactics is unforgivable” Barrie says, but it happens all too often.

Transform your success rate by learning the trade secrets and avoiding the costly mistakes. The Briefing is laced with proven tactical advice

to ensure that your deals are completed.

What are the benefits of this report?

• Nine most important negotiating tactics for securing a winning a deal
• Crucial details missed by advisors that most frequently lose assignments
• Fourteen key tasks you must deal with as soon as you’ve completed
• Nine key points to look for in your target company – and avoid

Table of Contents

Reality, Strategy, Opportunism and Theory

• Why most acquisitions under-perform
• Safer and risky acquisitions
• Kissing frogs is essential
• Commercial due diligence is vital
• Opportunism is a must
• Mergers should never happened – well, hardly ever
• Stock Market listed acquisitions targets

2 What Buyers Should Seek and Avoid

• Management continuity is a key issues
• Consistent sales and profit growth history are valid comfort
• Sales and profit forecasts must be robust
• Demonstrable cash generation is a major plus
• Realizable surplus assets are a plus factor
• Tax and VAT need to be clean
• Undue customer or supplier dependence is a potential risk
• Major customer contracts due for renewal are a cause for concern
• Relocation may be a plus or a minus

3 Develop your Strategy into an Acquisition Profile

• Strategy needs focus
• Evaluate alternatives to acquisition
• Organic growth
• Trading agreements
• Strategic alliances
• Minority equity stakes
• A joint venture or consortium
• A majority equity stake
• Performance-relates deals
• Assess the likely number of acquisition targets
• Write an acquisitions profile to focus your acquisition search
• Maximum cash available for acquisition

4 Find Relevant Targets and Woo vendors

• A UK in-house search – initial stages
• Be wary of using external advisers
• An in-house UK search – main search
• Don’t just contact vendors, woo them from the outset
• The initial meeting with the vendors
• The key meeting to obtain streetwise information from the vendors
• An overseas search

5 Use Commercial Common Sense to Value a Business and Make an Offer

• Adjusted profit history and forecasts are vital
• Quantify major costs rationalization opportunities
• Calculate the adjusted net assets
• Use your own adjusted profits for valuation
• Structure the offer to reflect vulnerabilities
• Discuss your offer face-to-face with the vendors

6 Negotiate the Deal and Sign Heads of Agreement

• Negotiate the Heads of Agreement
• Earn-out deals need defining
• Warranties and indemnities need to be negotiated
• Fix the maximum liability of the vendors
• Joint and several liability for vendors
• Agree the basis to trigger a warranty claim against the vendors

7 Steer the Deal Safely to Legal Completion

• Effective commercial due diligence is vital
• Environmental due diligence needs to be done on every deal
• Financial due diligence must include profit forecasts and the order book
• Pension due diligence
• Legal due diligence should include contractual issues and regulatory compliance
• Assess the disclosure statement by the vendor and negotiate changes
• Prepare to announce the deal internally and externally

8 Post-Acquisition Management

• Make an initial impact
• Set up reporting relationships and authority limits
• Establish clear rules for handling the media
• Keep head office interference to a minimum
• Get an overview of the business
• Start with the sales team
• Scrutinize overhead and administration costs
• Tackle production and procurement costs… and opportunities
• Set relevant short-term forecasts and objectives
• Financial planning and control need clear priorities
• Create a budget for the new financial year
• Examine research and development
• Address the medium-term future for the business
• Make redundancies urgently and humanely

9 Utilize Expert Streetwise Tactics

• Discuss the structure and form of consideration before making a written offer
• Realize that too low an initial offer may lose the deal
• Reveal any onerous conditions early to reduce their impact
• Spell out and sell your management approach
• Recognize that your conduct prior to completion is crucial
• When negotiating the final deal it is unlikely that
• the vendors can justify a higher offer
• Criticizing the business to the owners must be avoided
• Quid pros quos are an effective way for win-win negotiation
• When no agreement is reached, keep the door open

10 Choose and Appoint Advisers with Care

• Identify the help and advice you need and want
• Recognize the advice and help which is available
• Create an effective beauty parade to select advisers
• Always agree fees and negotiate the engagement letter before appointment
• Telephone references on individual advisers really are valuable
• Ensure advisers keep you informed of progress