Business acquisition is a common means of expanding an existing company's abilities, customer base, and operations. Though purchasing another business can help pave a path toward a more profitable future, it can also complicate operations and put both the existing business and the acquired one into a state of some chaos during the transition. Following basic tips for business acquisition can help identify acquisition targets and ease the transition into new ownership.
Ideally, buying a new business should increase the value of the original company, even after the cost of acquisition is considered. This means that a good target for acquisition will have a proven track record of profitability and a limited amount of liabilities. A business in heavy debt or one that is foundering will likely be cheap to acquire, but may cost far more than it is actually worth. Though calculated risks may sometimes be necessary in business acquisition, a smart businessperson will want to find targets that can start adding to company value as quickly as possible.
Proper research before entering business acquisition negotiations can not only help weed out companies that will diminish the total value of the business, but also prevent a ream of legal problems down the road. It is vital to have trusted financial and business advisors find out if an acquisition target has been accused of illegal behavior in the past. Purchasing a company with a history of unlawful dealings can hurt not only the reputation of the buyer, it may open the buyer up to future lawsuits.
It is important to get to know both the board of the target company and its employees. Employees will be justifiably worried about their company being bought by another business, as it can often lead to vast policy changes, lay-offs, and general upheaval. Being upfront about possible changes and having a clear and transparent transition plan will help gain the trust and loyalty of workers at the acquired company.
Just as the employees of a target company may be worried about the future, so too may the workforce at the buying company. Be open with existing employees about the opportunities this acquisition will give them, and let them know which departments may be merging ahead of time. Have department heads come up with detailed plans for smooth integration that are examined and approved before the acquisition takes place.
Putting together a good legal advisory team is often vital to business acquisition. By ensuring that legal due diligence is followed throughout the transition, attorneys can help nip any developing headaches in the bud. A legal team is also instrumental in building safeguards and warranties into the business acquisition negotiations, giving their client ways to safely call off a deal if any violations occur.
