Many people dream of setting up their own businesses and plenty try to put that dream into action, but statistics show that a huge percentage of start-ups fail within the first few years. If you’re looking for a safer, alternative option, buying out an existing company could be the answer.
Acquiring an existing business can be a great way of breaking into an industry without having to worry about those initial start-up costs and risks, or it can be a great way for an existing company to expand its operations or cooperate with its competition.
Whatever your reasons for pursuing an acquisition, it’s important to have the right approach. Acquisitions are huge endeavors with a lot of responsibility attached and plenty of things that can go wrong, so here are some key tips to keep in mind along the way.
Consider Financing Options
Whether you’re buying out a company as your first foray into a market or planning a strategic takeover of a rival brand, you’ll need capital to cover the costs. Business acquisitions can be immensely costly, but financing options exist to help the process along. Stock purchases, asset purchases, leveraged buyouts, and more can all be included in the best business acquisition finance options, so be sure to do your research and learn about your options.
Investigate Accounting Policies
Before proceeding with any acquisition, you need to know what you’re getting into. A company might seem financially sound from the outside, but it’s only when you look a little closer that you start to see the cracks. Make sure you take a detailed look at accounting policies for your intended acquisition to learn more about its revenue, accounts, inventory, and so on.
Do Your Research
Following on from the previous point, as well as looking at accounting policies, you really need to make sure you take the time to look at a company from every possible angle before proceeding with the acquisition. Conduct a detailed investigation, looking at everything from contracts and financial statements to tax returns, confidentiality agreements, and more. Due diligence is essential when it comes to acquisitions, so leave no stone unturned.
Respect the Foundations
If you’re buying a home, it doesn’t make a lot of sense to demolish the entire structure and start over once the sale has gone through. The same logic applies when buying a business. Even if you plan on making changes to your newly-acquired business, it’s important to have respect for the foundations they laid, the relationships they built, and the customers they acquired. Changing too much right from the start could put you at risk of alienating the company’s existing customer-base.
Take Care of Digital Rights
These days, so much business is carried out online, and digital rights can make a real difference to the success of your brand. When acquiring a new company, make sure you take action to lock down all the digital rights, including domain names, social media profiles, email addresses, and so on. Other companies or even individuals could easily buy up domain names and so on to bad-mouth your newly-acquired brand or extort you into overpaying for a simple website URL.
Put Together a Sound Strategy
Business acquisitions need to be approached and handled with a lot of care and attention to detail. Diving in headfirst can lead to disaster, so be sure to take your time, putting together your own internal team of experts across the board, from finance to legal. Make sure each team member knows their role and work together to set up a cohesive, sensible strategy to help the acquisition flow smoothly.
Negotiation is a huge part of the acquisitions process. No business owner worth their salt will simply waltz right in and pay the asking price without any questions asked, and there are many ways you can negotiate to achieve a better deal for your company. Often, companies looking to sell will have reasons and urgency behind their decision, so will be willing to make a few concessions along the way.
Acquiring a business is rarely a simple and straightforward affair; it involves a lot of preparation, analysis, and careful consideration of a multitude of factors. However, with the right attitude and approach, you can navigate even the most complex of deals to a satisfying conclusion. Keep these tips in mind when preparing for a business acquisition in order to see it through with minimal risk of unexpected issues or problems along the way.