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Why buy a company?
How to acquire a company?
How to find the acquisition target?
As your partner in an acquisition, we share the same interests. We want to understand your business plan as well as the operations and the fit of the target company, identify the risks involved and enable a successful deal by providing you with financing. We finance hundreds of transactions every year and therefore have plenty of experience and expertise in acquisitions. By involving us at an early stage, you can also benefit from our professional advice when evaluating projects and from our support during the entire process. We therefore encourage you to get in touch with us as soon as possible.
We provide financing to healthy and profitable businesses that generate cash flow and manage their risks well – this is a common interest we share with the business owner and also a sign of a company that creates value for its stakeholders. In some cases when we view that the risks are too high, we may refuse to finance a an acquisition or suggest that you borrow a lower amount. Our assessment of the risks involved is valuable for the buyer, as it’s based on our experience in financing hundreds of acquisitions.
Risks involved in acquisitions
With acquisitions, there’s an expectation of a return on the investment but also a high degree of uncertainty and risks involved. It’s important to be diligent in planning and preparing for the acquisition and to conduct the negotiations carefully. If you’re planning an acquisition, you need to have a solid business plan and make sure you have identified the right target company that helps you execute the plan. It’s largely your responsibility as the buyer to ensure that the target is compatible with your existing business.
The risks involved in acquisitions are mainly related to knowing the target company. As a rule, the business you’re preparing to buy must be profitable so understanding its profit trends and prospects is essential. It’s also important for you to understand the company’s customer, employee and supplier relations and how the potential acquisition will affect them. Moreover, you need to make sure the business has the necessary operating licences and permits. Another key thing is to understand the role of the company’s current owners’ and other key peoples’ participation in its daily operations and how the business would function without them – is there a chance you could lose some customer relationships if certain key people would discontinue working in the company?
On the financing side, the amount of working capital tied up in the operations will have an impact on your future financing needs and the amount of capital you will need. All these factors combined indicate an expected return based on which you can determine the company’s value and how much you should pay for it. If the risks involved in an acquisition materialise, this usually means the investment you made did not provide the return you expected and that the transaction price you paid was too high in hindsight.
We recommend that you seek professional advice for identifying and managing the risks involved in the target company, especially when it comes to finances, accounting, taxes, environmental issues and legal matters. Professional advisers can help you draft the sale agreement, negotiate the transaction price and even pull out of a bad deal altogether. The acquisition process requires expertise that only a few companies and business owners have on their own.
