Buying a Business

Picture of Mark StandishMark Standish Director - Head of Corporate Finance

Looking to buy a business to help your company grow strategically?

Perhaps you’ve achieved maximum organic growth and now’s the time to acquire a smaller company, merge with another or buy a much larger business.

Alternatively, you may wish to add new geographies, product lines or expertise to the services that you already offer.

Whichever route you’re taking, successful acquisitions take time and having a supportive, knowledgeable business advisor by your side will be imperative to that success.

Whilst the Merger & Acquisition (M&A) journey will vary from company to company, these are the typical steps to a successful transaction.

Step 1 – Identify and approach the target

You may know the type of business you wish to acquire, but don’t know where to start.

Or, there may be a business that you’ve been following for a while, and know very well.

In the first instance, we can use our researchers to help identify trading businesses that meet your criteria, as well as finding businesses already advertised for sale.

Then, in both cases, we can contact the businesses on your behalf to see if they wish to start a conversation about selling.

Step 2 – Value the target business

Once a target business engages in a discussion about potentially selling, it’s important to understand the fair value range you should expect to pay.

There are numerous factors to consider and you’ll need to weigh up the potential financial effects the acquisition may have on your existing, operational business.

Along with the financial and operational considerations, it’s wise to spend time optimising the tax structure of your acquisition.

If you’re not sure where to start with this, or any aspect of valuing a business, Fortus’ Corporate Finance team can help. Our aim’s to bring added value wherever we can.

Step 3 – Get ready to negotiate

After valuation comes the negotiation stage and this usually starts before the two parties meet to discuss the implications of the deal on the ground.

Our Corporate Finance team will usually conduct these negotiations on your behalf, keeping the personal conflicts and difficult conversations away from parties who may ultimately have to work together.

Some things to consider before negotiating:

  • What are the reasons for this potential merger or acquisition? Is it important to your business?
  • What’s the economic outlook for their market? Will there be a downturn affecting performance, or conversely, a boom?
  • Are there future opportunities for expansion? Will there be an investment cost? What about machinery, premises and people?
  • Is there room to increase margins? How competitive is their market? Do they have unexploited brand value?
  • What price point is the owner of the business expecting to achieve? (this is often unrealistic).
  • What price point are you hoping to achieve? Consider the ‘fair value range’, and your own funding limitations.
  • What allowances are you willing to make to ensure the deal goes through? Some concessions are around deal structure, rather than price.

Ultimately, once you’ve decided this deal is important to you, you don’t want to fall at the final hurdle.

We’ve extensive expertise in delivering successful outcomes for business owners, by asking the right questions and sealing the right deal.

Step 4 – Do your due diligence

Once you and the seller have agreed on a price and structure, it’s time to meticulously examine the financial, operational and legal position of the business.

The financial process is used to confirm that the financial assumptions upon which the deal is based are correct, and also to highlight areas of concern that can be mitigated in the legal paperwork by your lawyers. Fortus can help with this process.

Your lawyers check that the business has legitimacy to operate, good contracts, and mitigation of business risk. Any weaknesses can be considered before completion, and the deal amended or protection built into the documentation.

You’ll usually undertake the commercial due diligence yourself, looking at issues regarding customers, suppliers and staff that may impact your decision to proceed, or the price.

If at this point in time you’re needing a sounding board on a transaction, just give our Corporate Finance team a call. We’ll be ready to help.

“When I sat down for that first meeting with Mark Standish from Fortus Corporate Finance, we had an honest conversation about my plans: it was – an eye-opener. It was the first time anyone had asked me those kinds of questions.”

Charlotte Jamme Mia Tui

Interested?

Then get in touch with our Head of Corporate Finance - Mark Standish

Mark Standish

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