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Think before you buy

Acquiring or merging with an existing business can be an effective strategy for building a stronger brand, entering a new market and/or gaining expertise or intellectual property and can help you give your business a boost when market conditions are challenging.

Of course, this will only happen if you make the right deal at the right time. So the first step is to figure out your acquisition strategy – what are the gaps you are looking to fill? Are you looking to increase the geographical coverage of your business, enter a growing market quickly or acquire a product or service that you feel has significant growth potential?

Be prepared to spend plenty of time on this stage of the process. You might know your own business but you will need to understand the broader market if you want to identify the right business to take over.

Be realistic…

The best deals will create economies of scale and introduce complimentary skills and experience, but given the challenges of raising finance in the current economic climate you can expect any funding provider to ask a lot of questions about your business as well as the one you plan to acquire or merge with. Be realistic about the amount of due diligence involved and try not to get frustrated.

Consider engaging a third party to manage the process. Even the most straightforward transaction can take months to complete and you cannot afford to let your existing business suffer because you are distracted. This might be the only deal of this type you ever make so give yourself the best possible chance of getting it right.

…be determined

Finding the right business to buy takes time so you need to be proactive if you really want to make an acquisition. Small businesses have a tendency to wait for opportunities to present themselves rather than going out and finding them and also to let discussions drag on.

This is another reason for getting external assistance. Accountants are often aware of business owners in their network who are looking to sell and can connect you with specialist advisors who understand the process.

Most sellers will enter negotiations with more than one potential buyer, so if you don’t stay focused on getting the deal done you could get dragged into a drawn-out process or worse still, a bidding war with a rival buyer.

Minimise your risk

Once you have started the acquisition process, you may want to speak to the business’s major clients and suppliers to reassure them that it will be business as usual when the deal is done. The value of existing contracts will be one of the main factors in setting the purchase price so you don’t want these relationships to be strained or even broken by the time you take over.

You also need to think about how you will integrate the new enterprise into your existing business. Will you still be in charge? Whose premises will you use? Are there any contracts in place that might need to be renegotiated?

Finally, be realistic about what the deal is worth to you. The financial information generated by a cloud based accounting solution such as Big Red Cloud will help you decide how much you can afford to pay for the business.

In the next blog post we will look at the M&A process from the perspective of the selling company.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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