5 Things to Take Care When Planning an Acquisition


Acquisitions allow businesses to grow rapidly, leapfrogging ahead of the competition. By assimilating a business that's already functional, a company saves the time necessary to build up units from scratch.

Big Tech offers the best example of this with juggernauts like Facebook acquiring Instagram and Whatsapp.

However, acquisitions aren't a sport reserved for big corporations. Businesses of all sizes can benefit from picking up know-how, infrastructure, and clientele through purchasing a company.

Bringing a successful acquisition to fruition requires taking the right steps to ensure the desired outcome.

1.  What's the Why?

Putting things in writing often gives business owners a clearer perspective. While acquiring a business may seem like the right move, the importance of defining the reason for the acquisition and the ensuing strategy cannot be overstated.

Purchasing an existing company has to make more financial sense than building up a separate brand. Does the targeted company possess enough value to justify its acquisition?

Going into the acquisition process requires a predetermined strategy so that costly mistakes can be avoided.

Acquisitions are a product of negotiations and there are many intangibles to consider. Having a strategy places boundaries on the sacrifices that should be made on the part of the acquiring entity.

Ultimately, the purchaser needs to know why they are acquiring the business. Is there a trade secret or specific assets that will offer synergies to its status quo?


2.  Putting Together a Dream Team

Acquisitions require a wide range of expertise. A business owner cannot possess the knowledge or focus to micromanage the entire process.

Competent professionals in each field need to be a part of the acquisition team for the deal to go smoothly.

A financial and tax analysis should be the responsibility of an accredited accountant. Legal matters need to be overseen by a lawyer that specializes in the subject matter.

Insurance, marketing, and technology experts may be necessary for properly assessing the opportunities and risks.


3.  Doing the Proper Due Diligence

Are there any skeletons in the closet that may come back to haunt the acquiring company? After the signatures are placed and the deal is complete, it's too late to complain about underlying issues regarding the acquired company.

That's why the acquisition team needs to scrutinize every aspect of the target business.

 

4.  Securing Financing

Financing has the potential to be the bottleneck in any acquisition. Without the necessary capital, negotiations won't end in a positive outcome. An option such as small business acquisition loans from Lantern by Sofi allows for flexibility in obtaining liquidity.

Businesses with less-than-stellar credit can still obtain financing by weighing their risks. As the experts at Lantern state:

“One option is to offer a large down payment along with collateral or a personal guarantee. You may find a lender willing to accept just one of these additions or you may need to extend all three to get approved.”

 The risk, of course, is that you could lose your personal assets if you default on the loan, so it’s crucial to weigh that risk against the potential for return.

 

5.  Integrating for Success

 

Like a transplanted organ in a human body, the health of the new business entity that arises depends on integration.

With the proper planning, the two companies that are now functioning as one should work seamlessly. From employee interactions to information technology integration, the post-deal reality of the company needs to be coherent.


Ensuring a Methodical Acquisition

By spending time planning and hiring the right experts, the acquisition process can go smoothly and offer economies of scale. From securing capital to examining the target company's history, all details contribute to a profitable deal.

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