We are often focused on putting the deal together, ensuring it is ‘what it says on the tin’ and getting the deal completed.
Once bought it may be too late to avoid some common pitfalls;
The right team
• Ensure YOU have the team to cover the top roles in the company – don’t rely on leadership and support in the purchased company.
• You’ve only just met them, you’ve know your existing team a lot longer ….
• The sellers will have a ‘rose tinted ‘view of the future to get the sale across the line.
• Equally, new blood at the top table can be refreshing, but tread with caution and outline the parameters
Existing team
• Look deep into your own team first before recruiting for any management gaps
• Attitude is everything, some of the skill sets can possibly be learnt…..
• The next director may just be across the office
Purchase structure
• Don’t be saddled with onerous contracts
• Purchase the target company as a subsidiary
• Structure the assets and liabilities in the correct ‘Silos’
Commercially driven deal
• Whilst tax considerations are foremost in our minds, the commerciality of what a merged company looks like – with a 24 month detailed strategy, comes first.
• Tax/entrepreneurs relief/EIS allowances come second. In truth they are done simultaneously. Designate the second part to your accountant, leaving you to focus on the ‘new co’
Not all deals work
• We are all aware successful M & A’s are a challenge
• As an entrepreneur, you will need to think like an accountant, not for too long through!
Just take a step back from all the momentum of the sale and do a sanity check and a contingency plan if the purchase doesn’t work
Don’t take your hand of the tiller
• You have got your company into the successful position of being able to be able to purchase a company
Don’t change your principles that have got you there
• Don’t be figure led, be product and service led, the figures will follow
The right Professional team
• As you grow and do deals, ensure you have the commercial support of a good solicitor , accountant and IFA.
• This is not just staying with the ‘old family contact’, but do keep them on board and listen to their opinion, they know you best.
• Ensure the firm isn’t too big that you are not passed from one person to another.
• Break away from the banks panel of choice – they may be too big and invariably not on your side – the banks give them more business than you.
• This isn’t a price driven appointment, but their approach to billing can be an indicator and you may pay more in the end but it will be worth it
• This is a very important area, and ensure they are on your side.
Partners
• It may be inevitable as part of the deal that you partner up with new colleagues, in the target company
• An over used term but its essential to check the ‘chemistry is right’.
• A detailed alignment of goals, targets and exit strategy – both personally and for the business needs to be part of the plan
• Don’t have too many voices around the table and don’t be a meeting lead company
• Ensure you have a robust share holders agreement that also covers the negative as well as the positive
Don’t sweat the small stuff
• Prioritise whats important, focus on the top line items.
• Don’y quibble about the final penny, there has to be ‘give and take’
• All aspects won’t be perfect in a deal so take a pragmatic view, just ensure the main drivers are intact
Communication timing
• Don’t be tempted to tell the team too early whether you are buying or selling. You will be close to a number of them, but only tell the ‘top table’ where silence can be guaranteed.
• All communication should be done after the deal is done, with a planned presentation of the way forward.
• Any early leakage of information will cause worry, concern amongst the ranks and lead to a period of turmoil and inefficiency, while the deal is finalised
Be a small big company, not a big small company. Have the structure, practises and rules to cope with a takeover. Most importantly; take the team with you.
You and your co-directors need to be extra vigilant in the first months as this will determine a successful , well implemented acquisition.
Good luck with it all !
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