Growing Your Business Though Acquisition

Growth can be achieved ‘organically’ through increased investment in marketing and business development activities or alternatively, growth can be achieved through acquisition.

It is vital that your growth strategy through acquisition is based on sound financial planning. So what do you need to know?

• how much is required to fund the acquisition?
• when it will be needed?
• when it will be available?

A detailed cash flow forecast is essential, as outgoings are usually going to rise sooner and faster than revenues. It may be beneficial to build in some surplus, as most projects take longer to take off than originally predicted.

Detailed forecasts regarding sales, working capital and sources of seed funding, and even second round funding, need to be drawn up.

Businesses looking for capital investment, apart from bank loans, have three main sources:

• Equity capital provided by the yourself or friends and family
• Venture capital – investment capital by an external fund or business
• Bank Loans  

Developing the Acquisition Criteria

The acquisition criteria will include:

• Target Type - Competitor / Supplier / Complimentary Business etc
• Target Financials – Turnover / profitability / asset valuation
• Target Location – Leinster / UK / Global / Internet
• Target Acquisition Funding – Own Resources / Bank Finance Available / Equity introduction
• Deal Structure – Earn-out / Share for share / Loan notes

How can OSK assist you in negotiating and completion of the deal

Stage 1

The OSK corporate finance team will act as project managers of the deal. It is important that there is clear agreement of roles from the outset and OSK will issue an Engagement Letter which outlines our understanding of your requirements during the assignment.

Stage 2

We would usually initiate contact with a Target company (or their advisers) on behalf of you and initial exploratory meetings will be held if the Target company wishes to engage in the process.

In advance of any exchange of information between both parties, a Confidentiality Letter will be signed.

Stage 3

If there is an agreement in principle agreed between buyer and seller, then the process will move to formal due diligence and drafting of legal agreements.

During the completion stage, the OSK corporate finance team will perform due diligence on the Target’s business, reviewing all financial, tax and legal areas.

The outcome of this process will be invaluable to assist the purchaser’s legal adviser to include necessary warranties and indemnities when finalising the legal agreements.

Whether you are selling your business or need advice to expand your business, the corporate finance team at OSK can assist you in achieving your objectives. Contact Dylan Byrne Director for further details.

Other resources:

Tax Issues of buying a business

Due Diligence – What’s it all about?