What to consider before making a business acquisition

Simply put, a business acquisition is the purchase of a company’s stocks to take control of that company. But why?

In short, business acquisitions can be beneficial for many different reasons. Not only do business acquisitions help companies to grow, but they may also help to diversify the business, help you enter new markets and gain more of the market share. In some cases, the acquisition of a company can be used to obtain certain technology or expertise too.

However, an acquisition is a big investment and should not be made lightly. If you’re considering dabbling in acquisitions, read on for some helpful tips and tricks to help you decide whether acquisitions are right for you.

What to consider before making a business acquisition

1. Consider your reasoning for the acquisition

Firstly, you’ll need to think about why you want to make the acquisition. For example, there’s no point acquiring a business because it’s cheap. It must benefit you and your overall business strategy.

2. Thoroughly analyse the company you wish to acquire

Before you take the plunge, it’s important to do your due diligence into your target company. You will want to look into everything from their finances to their assets and liabilities. If you fail to do this, you may find out something untoward later down the line.

3. Consider your finances and how you are planning to pay for it

Unfortunately, businesses don’t come cheap! If you want to acquire a company, you’ll need to have the funds ready. If you haven’t got the cash but you’re 100% certain you’d like to go ahead and grow your business, you may wish to consider taking out a loan to cover these expenses. Asset based lending can be a good option in this instance.

4. Investigate the company’s culture

Before you acquire a business, you’ll need to properly investigate the company’s culture and whether that’s aligned with yours.

Although it may seem like an afterthought, having a positive company culture can help reduce staff turnover, allowing you to keep your valued employees. And with one in four employees planning a job change imminently, that’s significant!

5. Hire a top legal team

Finally, it’s time to hire a great legal team to finalise the deal. No matter the size and complexity of the acquisition, you’ll want a legal team that are experienced in M&As to handle your case. With so much to consider including tax, employee affairs, real estate, and data privacy, you don’t want to scrimp and save on this aspect.

Final thoughts

Business acquisitions are an excellent way to grow your business, but they aren’t without risks. Luckily, by following our useful tips, you can decide whether acquisition is for you, and if it is, how best to go about it.