28 June 2019
For those teams aiming for above market growth, a targeted acquisition is usually one of the stated goals.
Supply outstrips demand
Generally, the trend continues to be that there are more buyers than sellers; with demand for quality businesses continuing to outstrip supply. Acquisitive teams with a clear strategy, outwardly vendor-friendly approach, and, of course, funding in place are the most successful.
Buyers have an idea of what they are looking for in an acquisition, how it is to be integrated with existing operations, what management is required post-deal, and how it will be financed. Early open answers to these questions help to convince a vendor that the approach is serious and provides confidence in the ability to ultimately deliver. Assuming the price and deal structure is right, these features are important elements in a vendor’s decision on who to sell to.
The vendor-friendly approach
In an acquisition, the natural buyer tendency is to be cautious; to seek to minimise the risks, to protect the downside, and to undertake the transaction in as short a timescale as possible. An increasing trend when buying owner managed businesses is for the acquirer to actively make the sale process as easy as possible with a vendor-friendly approach.
Often this is sold as ‘light’ on financial and accounting due diligence, with a focus on just the key aspects and then a balanced approach to the transaction legal process.
Risks or issues identified are investigated and then, where necessary, covered in either the legal agreement or how the transaction is structured. The due diligence process recognises the underlying quality of the business, its management or products/services, is streamlined and, as a result, is more manageable for sellers.
In the OMB sector, a sale is also a personal transaction. To improve the chances of a successful acquisition strategy, another area where more focus is applied earlier in the process is ensuring that the individual personalities are catered for and that open communication exists between the principals.
Making the process as easy as possible for the sellers has often been an aim, yet it is difficult to achieve in practice, especially as a transaction process unfolds. However, vendor-friendly is becoming a more common feature in the market for quality companies.
UHY Hacker Young Corporate Finance can support you with both selling and acquisitions advice, as well as practical steps to take to get your business ready for sale. Please get in touch or visit our Corporate Finance page for more information.
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