WINNRS
Match Plan guided the acquisition of WINNRS.
Acquisition of a company
Acquiring a company
Acquiring a company is a big step and generally something you only do once in a lifetime. This process requires a lot of specific knowledge and involves several disciplines. Every business has interesting elements, but there will always be a number of lesser issues. In short: a trajectory in which the risks are often high, and in which it is therefore wise to be well advised. We assist companies in taking over a business. On this page, we will tell you all about this process.
This table of contents is interactive
Successfully acquiring a company in 7 steps
Introduction for acquiring a company
Introduction into acquiring a company
Why acquiring a company?
To start with, there are basically three reasons for taking over a business;
This could be acquiring a direct competitor. It could also be that you are acquiring a supplier or a customer, for example, in order to achieve synergy benefits and/or to be able to offer a wider product range to your existing customers. In addition, you may be planning to acquire several companies and add them to your organisation, in which case we speak of a so-called buy and build strategy. In all these cases, acquiring a company has a strategic motive. We then refer to these cases as a strategic buyer.
You may also be a buyer primarily looking for a return on your assets. We often see buyers whose primary goal is to achieve financial returns join together in an investment fund. When your primary goal as a buyer is to achieve returns on your assets, we refer to this as a financial buyer.
For example, if you have worked in a management position for a number of years, you may be looking for the next step in your career and would like to start for yourself. Taking over an existing company is then a good option to get started immediately in a business with a proven revenue model. This is also the case when you take over a family member’s business. When you want to take over a company in order to start for yourself, this is called a management buy-in. If you want to buy in or take over the entire shares of the company where you are currently employed, this is called a management buy-out.
Acquisition of a company
Step 1: Define acquisition strategy
When considering taking over a business, it is important to decide how you want to go about it. There are two options;
The first option is to take over a business independently (possibly with help from your accountant and/or tax specialist/lawyer).
If you want to take over a small business with a relatively low expected transaction value (500K<), it might be a good option to tackle it independently. The risks are then relatively manageable and the advisory costs of an acquisition advisor relatively high. You can approach a company you want to acquire yourself. Or search on one of the online platforms for business acquisitions, such as Brookz or Bedrijventekoop.nl.
The second option is to engage an acquisition adviser. When the expected transaction value of the company to be acquired exceeds about 500K, it is always advisable to involve an acquisition advisor. After all, the stakes are high, and the acquisition process quickly becomes a lot more complex the bigger the deal. Besides finding the right acquisition candidate (or if you already have a candidate in mind), an acquisition advisor will help you with all further steps in the process. Think of strategic advice, valuation, negotiations, the (legal) contracts, tax aspects, the takeover financing and an audit. In addition, an acquisition advisor also supports you on a personal level, distinguishing reason from emotion in order to protect you from a mis-sale.
Acquiring a company
Step 2: Drawing up a profile
If you do not yet have a business in mind to take over, it is important to clearly identify what type of business you are looking for. To get a good idea of the type of business you want to acquire and what opportunities are available in the market, it is important to draw up as detailed a profile as possible.
Details that recur in a search profile are:
- In which industry/sector should the company operate
- What does the core business of the organisation to be acquired consist of?
- What size of company suits you (turnover, FTEs and/or profitability)
- What kind of corporate culture do you prefer?
- What role do you want to assume within the organisation? For example, do you want to manage the company yourself or only operate from an advisory role?
- Are there specific preferences in terms of location or business environment?
Acquiring a company
Step 3: Candidate mapping, approach and introductory interviews
Once the profile has been drawn up and the acquisition strategy determined, it is time to identify suitable acquisition candidates. Of course, this only applies if you do not yet have a party in mind for acquisition. Based on the already drawn up profile, we will search our various databases, our network and our market research for interesting parties to acquire. We then approach these parties and ask whether they are open to an introductory meeting. We can also actively distribute your profile to our network of advisors. If you wish, you can also approach acquisition candidates yourself.
After approaching the various parties, the process will continue with the interested potential acquisition candidates. Follow-up steps in the acquisition process will be coordinated with these parties, such as scheduling an introductory meeting. After signing a confidentiality agreement, an initial introductory meeting can be scheduled. If the outcome is positive, we can proceed to the next step, namely requesting additional information.
Acquiring a company
Step 4: Valuation and negotiations
When the introductory talks and the analysed information give reason to continue the process, it is important to get a good idea of the value of the organisation to be taken over. This is why we carry out a valuation. This is an essential part of being well-prepared to enter negotiations.
Non-binding offer (NBO)
After carrying out the valuation and after possible follow-up talks, it is time to make an indicative and non-binding offer (also called a non-binding offer/NBO). An NBO contains, among other things, information about the reason for your interest as buyer, the future plans you have with the company, the role (after takeover) of the current owner, the purchase price offered, the financing and payment structure, the resolutive or suspensive conditions and a time schedule. The payment of the purchase price included in an NBO can be structured in several ways. This can also be a combination of the different structures, as shown below.
Possible elements for paying the purchase price
This is a deferred payment which is contingent on future performance or objectives of the organisation to be acquired. The earn-out may be paid in full, partially or not at all, depending on whether the projected objectives are achieved.
This is a deferred payment of the purchase price in the form of a loan to the buyer. The payment is guaranteed and does not depend on future performance or targets. Often, the seller also receives interest on this loan. In addition, this loan is often subordinated to any loan you, the buyer, take out from the bank and other external lenders.
The purchase price is paid directly to the seller during the transfer at the notary. This portion can include both own funds and financed funds.
Negotiation process
After preparing and sending the indicative offer (NBO), you have to wait for the seller’s response. This is followed by the negotiation process between you and the seller. We assist in defining a negotiation strategy, usually do the negotiations for you and ensure that timelines are concretely followed by making procedural agreements. This process is often intensive and technical, as it is at this stage that reason and emotion come into play, and these can still conflict. At this stage, an adviser who can manage this in a good, personal and careful way is essential.
Acquisition of a company
Step 5: Preparing contracts
Once agreement has been reached on the purchase price and all conditions, this will be recorded in a letter of intent (or Letter of Intent (LOI)). The LOI puts the agreements made on paper. This is a document drawn up by a corporate lawyer or lawyer. Upon the agreement of both parties, the LOI is signed by. The LOI provides exclusivity between buyer and seller. In addition, it is a means for both parties to streamline the further process by agreeing on some essential agreements and deadlines to increase the chances of a successful completion.
”Match Plan is an organization that is flexible, no nonsense and can realize progress in a complex acquisition process in a short amount of time”
Walter van de Wege, CEO Happy Horizon Groep
Acquiring a company
Step 6: Apply for leveraged finance
Securing leveraged finance is sometimes an essential part of the deal. But also a very interesting option if you would have sufficient financial resources of your own. The reason why is that with leveraged finance, you do not have to draw on your liquid assets, allowing them to be invested elsewhere. With leveraged finance, you create the so-called leverage effect, whereby you can create a relatively high return on your contributed equity. How much you can finance when taking over a company depends on your personal situation and the type of buyer (see reason) you are.
- For a management buy-in or a management buy-out candidate, the rule of thumb is that you bring in at least 25% equity
- For a strategic buyer, depending on the situation, it is possible to finance the entire takeover
- For a financial buyer, the amount to be financed depends mainly on the percentage of shares acquired
Financing memorandum
Applying for leveraged finance requires a financing memorandum. This is a document in which we gather the full financial situation of the company to be acquired. We then send this document to various financing parties, identifying the most suitable financing parties depending on the company.
We choose the best party that has been with you
These parties then make an indicative proposal that our financing experts will compare and further negotiate. Match Plan is an independent advisor. This means that we are not tied to one or a limited number of lenders or have an interest in a specific party. As a result, we will always compare parties and choose the lender that best suits your needs. In this comparison, we look beyond just the well-known banks. Match Plan is in contact with many alternative financing parties and investors. This way, we can select the most common batch for you. We can also guide you in a partnership with a private equity party to acquire and finance several companies in succession through a buy and build strategy.
Acquiring a company
Step 7: Due diligence and closing
Due diligence
When acquiring a company, it is smart to include the carrying out of an audit (or due diligence) as a condition in the letter of intent (LOI). In the due diligence, you as a buyer can check the correctness of the information provided, dive deeper into various topics that were broadly discussed during the process and ask additional questions about the information provided.
It often happens that the results of the audit differ (slightly) from the data as initially presented. A final negotiation is therefore often conducted based on the findings in the audit. A final purchase agreement is then drawn up by a lawyer so that the agreements are legally recorded in the correct manner.
Closing
This is the final step in the purchasing process. At the closing, the formal transfer of the company takes place at the notary. The transaction documentation is signed by both parties and the purchase price is transferred to the seller with the intervention of the notary. This is the moment when the company is formally taken over. This is followed by the moment to toast a good future together.
Acquiring a company
Advice for acquiring a company
There is a lot at stake when acquiring a company. It not only involves a lot of money, but also requires a lot of effort on a personal level. How do you make the right considerations during a purchasing process? An acquiring advisor will guide you through all steps during the takeover of a company. For example, during an acquisition, you will encounter questions such as; Is the asking price realistic given the profitability of the company? Do you opt for an earn-out arrangement (depending on future performance goals) or better for a vendor loan (a deferred payment)? What is the right tax structure for the company? Do you pay the ‘cash at closing’ yourself, or is financing part of it a better choice? How do you assess the results of the audit? And how do you legally record the takeover? A small selection of the questions you will face if you want to acquire a company. Match Plan guides you during the takeover process from start to finish. We also assist organizations in setting up and implementing a buy and build growth strategy, involving the acquisition of multiple companies.
Acquisition of a company
Tips for acquiring a company
Try to look rationally at the entire position and situation of a company. Having a positive feeling about a party is important, but remain critical throughout the entire process. Emotion is often a bad advisor and can lead to a mis-sale.
Many buyers wait until a company is put up for sale or search among the companies that are currently for sale. This means you are dependent on what happens to be offered, and the competition in the process is often fierce. When you approach a company yourself (or have one approached), you can search much more specifically for what you really want, and you usually have little or no competition in the purchasing process.
An acquisition advisor has years of experience in acquiring companies and can therefore accurately assess what is a good purchase and what is not. In addition, an acquisition advisor can provide you with rational advice throughout the entire process and provide guidance on all aspects that arise during the process.
All aspects of acquiring of a company
Are you curious about what to expect when acquiring a company?
In our e-book ‘Acquiring a company? What to expect’ We have extensively listed the various steps of the process.
"*" indicates required fields
References
Related references
