This New York Enterprise report article discusses how to minimize risks associated with purchasing another company.
1. Strategic Acquistion Plan – Create a strategic acquistion plan that articulates the motivations for acquistion. Is it,
for example, to growth faster and easier, geographic expansion, vertical integration or other strategic reasons? The plan will include an analysis of the strengths and weaknesses of your company and competition, a strategic acquistion plan and identify potential acquistion targets.
2. Acquisition Criteria – Develop specific acquisition criteria including specific industry sector, revenue and cash-flow parameters, location, majority/minority investment preference and any other criteria important to you.
3. The Acquisition Team – Honestly evaluate your management team’s talent and bandwidth to plan, find, negotiate, integrate and manage an acquistion. Build the appropriate internal and external deal team up front for greatest success. That team often includes key internal management, a mergers and acquisitions attorney, investment banker, outside accountant and outside tax experts.
4. Financial Due Diligence and HR Issues – Financial and human resource due diligence is crucial. The investment bankers and accounants will assist with this.
5. Purchase Agreement – Legal documents such as a Letter of Intent and, finally, the purchase agreement that document the terms of the deal and the related structuring and negotiations are the final element in an acquisition.