Acquisitions can be tough on both participating companies, but creating a successful strategy can keep things going smoothly and avoid any disruption in cash flow. By following these tips, you may find that creating an effective acquisition strategy is a lot easier than you expected.
Define Goals
Every acquisition should have clear goals. Whether it’s to improve the target company’s performance, consolidate and remove excess capacity from the industry, or to lower the cost of production, it’s important to define why an acquisition is happening. The goals should be clearly defined where everyone involved can work toward the same results.
Plan out each goal and explain what the end result should be. How can these goals be achieved for each member of the team? By doing this, you can clearly define goals to complete the acquisition with as few issues as possible. Some teams choose to set their targets in four increments: 30, 60, 90, and 180 days. Not only does this set a clear end-date, but it also separates long-term goals from short-term goals.
Create a Transition Team
Acquisitions can cause bumps in both the target and purchasing company, but the move can be facilitated by developing an internal team that assists in the development. The team should have representatives from every portion of the company—finance, operations, and sales and marketing. Outside experience can also assist the transition. Attorneys, accountants, investment bankers, valuation experts, and other specialists can offer help that may not be available from within the business.
Constantly Communicate
Acquisitions have a lot of perpetually moving parts, and communication keeps the parts moving properly and effectively. Defining goals and piecing together a transition team is an excellent way to begin an acquisition, but the members of each team have to communicate to each other on a regular basis. For example, if the shareholders are ready for the acquisition, but the finances aren’t there, the deal can fall through and even put the business in debt. Encouraging constant communication can keep the purchase of the target company simple.
Finance the Acquisition
Financing an acquisition can be achieved in a number of different ways including cash, assets, and other types of equity. It may also include the purchasing of debt from the target business, which can make the acquisition a little more difficult. In some situations, bank financing can be impossible to secure if a smaller company is looking to purchase, forcing businesses to rely on cash reserves.
There are also some creative financing structures that can help bridge the gap and complete an acquisition. Seller notes—which is a debt obligation whereby a seller is paid by the buyer at a future date—is one way some organizations complete purchases. Additionally, it may be possible to offer a private placement to a small group of investors.
