Any business owner contemplating an acquisition or merger will be aware – even if just peripherally – that there are many pitfalls into which they could stumble.
There is, however, a high reward for any business that can navigate this tricky time and find its way to the other side. Here are our top tips.
Decide How to Structure Your Deal
There are a number of different ways to structure a deal like this – all of which have different ramifications for you, the businesses involved, and for its tax implications.
A business purchase deal offers a little more flexibility in terms of what you take on – and, of course, the liabilities you or the buyer choose not to acquire – whereas a share purchase deal generally demands that each shareholder agrees over the transaction, which can be a little more complex.
A share purchase generally results in milder tax implications, however, since the proceeds are paid to the shareholders directly, rather than via a dividend (which can increase tax).
Complete Your Non-Disclosure and Heads of Terms as Soon as Possible
The preliminary stages of any deal should always be framed by these two vital documents. The non-disclosure agreement is designed to prevent confidential information from being shared, as well as the news of the potential deal from being released to the public, or the businesses’ employees, before you are confident that the deal will take place, or are ready to make a formal announcement on your own terms.
In addition to your Heads of Terms, which offer a framework for the acquisition, you will also want to ensure that you have agreed upon a timescale and key terms of your proposed deal. Otherwise, there will be an element of feeling your way through the dark.
Make Retaining Key Employees a Priority
It is very common for one of the primary attractions of a business to be its employees. For that reason, ensuring that their commitment to the company is solidified – and minimising the risks of losing key talent – is essential during this process, or it could derail an acquisition in the final stages. This guide to retaining key employees is a great starting point.
Have a Corporate Solicitor do your Due Diligence
Intellectual property (IP) is almost always a central component of a sale agreement. In the majority of cases, the buyer will have to secure the rights in order to gain the most possible benefit from the acquisition – or even to be able to run the business as it was run before the acquisition.
As a buyer, you will want to make absolutely certain that the deal includes this intellectual property. This is something that you will want a corporate solicitor to do on your behalf, in order to make sure that you are clear on what you are getting. You can click here to find out more about how a corporate solicitor can help you navigate these high stake situations.
Don’t Forget the Business Premises
It’s likely that the business is currently tied into a lease for an office or, alternatively, a warehouse, retail, or storage space. While it may not be at the very top of your list of concerns, it’s very important that you consider whether the business will continue to operate on these premises, or whether the lease will need to be broken.