A buy side arrangement where an existing individual, management team or business is looking to buy a business for themselves or further grow their existing business. This can take various forms depending on the buyer’s motivation whether for personal reasons or company reasons to compliment or bolt on to an existing division of their business. Valuation drivers are key in making a serious consideration in acquiring a business and will always be factored in when looking to make an acquisition. In weighing the key valuation drivers will help in nailing down a price range on what you are willing to pay for the existing business. The drivers of valuing a business are fairly uniform across various businesses and industries, however, where they vary is how they affect the business and its overall performance, and as a result, the value to yourself as a buyer of that business.
When making an acquisition there are certain factors to keep into consideration and not deviate from when evaluating the opportunity at hand. Here are some key points to keep into consideration when making the acquisition is:
Write down the three most compelling strategic criteria for your next deal. If they are not met, pull the plug.
Identify and understand the critical deal assumptions in your model assumptions that could blow things up if incorrect.
Evaluate due diligence. If you have not found at least one significant problem, you have not looked hard enough. Focus on the deal breakers.
The work does not end when a deal closes. A disciplined approach to mergers and acquisitions includes monitoring progress toward targeted rates of return and key performance indicators.
These items are critical to always keep top of mind when making an acquisition and not waiver on or compromise on and end up making a purchase that is dilutive as a whole. This can create hostility toward the seller and amongst other shareholders or stakeholders in your existing business if you are acquiring for growth. This needs to be avoided at all costs and not end up being deemed as a failed acquisition.
All things considered you want an experienced team of professionals backing you up and ensuring you are receiving maximum value when making an acquisition. In doing so, all pitfalls or potential issues are addressed early and can be determined if they can be rectified before closing or if they are a complete deal breaker.
Should you have any further questions, please contact us and we would be happy to answer any questions you may have.
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204, 2333 18th Ave NE, Calgary, AB Canada
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