Resources

• Articles
• Legislative Updates
• Economic Recovery Services
• Client Newsletter
• Payroll Tax Guidelines
• 2009-2010 Tax Planning Guide

Acquisition Tips for Buyers

Buying a business isn't easy work. Finding a company that fits well with yours, negotiating the deal, performing due diligence, and integrating the company after the deal closes are full-time challenges. To improve the acquisition process, consider these suggestions:

• Be willing to exit a deal.
  Don't let the desire to close the deal overtake your better judgment. This could lead you to make errors in negotiating and could end up playing into the seller's hands if you pay a higher price than necessary. The money, time, and energy that you've invested in the negotiation process are nothing compared to the long-term cost of entering a bad deal.
• Exhibit flexibility in structuring the deal.
  Some sellers may have preferences as to how they want the deal to be structured. Should you offer cash or stock, for instance? Come up with alternate ways of structuring the deal so the buyer sees that you're flexible. Be prepared to justify your offers.
• Use qualified advisers.
  If you want to close an acquisition successfully, hire professional advisers. Their knowledge of the market, competitors, and acquisition targets can more than make up for the cost of their advice. You want to make acquisitions that strengthen your company's position, so spending your time and money targeting the wrong company, or being persistent when you should exit the deal, can be costly.
• Keep the seller's advisers in the loop.
  If a seller has professional advisers working for him or her, don't try to avoid dealing with them. Contacting the seller directly may be construed as an attempt to take advantage of the owner. If the seller has hired intermediaries, make sure they are present when you deal with the seller.
• Be prepared to act, but be patient.
  Sellers act in mysterious ways. An owner might tell you one day that the business isn't for sale and then put it on the market the next. Be prepared to take advantage of opportunities to buy attractive businesses, but also be prepared to be patient. Stay in touch with a business owner and make sure you're on the short list of potential buyers when the decision to sell is made.
• Be courteous and honest.
  The kind of person you are and how you run your business may be important to the seller. A seller may be concerned with how you plan to treat the business and its employees after you make the purchase. Be prepared to discuss the kinds of changes you plan to make. Also keep in mind that how courteous you are makes a difference in the way a seller perceives you.
• Perform due diligence.
  Ask the appropriate questions before you complete the transaction. If you're careless, unanticipated costs could cripple you after the purchase.
• Explain the rationale for the price you're offering.
  Be prepared to articulate the rationale for your valuation of the business. Sellers may be offended if you make a low offer without an explanation. If there's a problem in the company, explain that your offer is lower because you'll have to spend money to fix it.
• First the deal, then the integration.
  Your work isn't completed upon closing the deal. Now you must focus energy on integrating the company into your business. That means concentrating on finances, computer and manufacturing systems, management, employees, and corporate culture.

By Fred Rock

Comments or Questions