Scaling through acquisition is it a smart business move

Acquiring or merging with another business can be an effective way to scale and accelerate business growth. Whether you are looking to expand your current customer base, enter a new market, acquire valuable assets, or strengthen your competitive position, an acquisition can unlock a range of new opportunities.

However, not all acquisitions are the same, and each come with its own set of challenges and risks.

So, what should you know before diving into this potential growth opportunity for your business?

Understanding the acquisition and negotiations

The first step in any acquisition - whether buying an asset such as a client book or the entire company - is understanding the strategic fit between your business and the seller’s business. The acquisition should support your company’s growth goals and be clear on how it will fit into your broader vision.

Once you have a clear strategic fit, the next step will be to negotiate the terms of the deal with the seller. This includes negotiating the purchase price, the payment structure (e.g., whether the purchase price is paid in full upfront or staged over time as certain milestones are met), and any additional conditions, such as the seller remaining employed with the purchaser for a certain period of time after the deal is finalised.

We’ve negotiated the terms - now what?

Once both parties have agreed to the key terms and are ready to move forward, it is time for the purchaser to conduct a thorough due diligence. This is an important step, even when purchasing just an asset.

It involves reviewing things such as the financial, operational, and legal aspects of the target company or asset to identify any potential risks or concerns that would not have been known at the negotiation stage. The goal here is to ensure there are no surprises after the deal is finalised.

Ready to sign?

After aligning the acquisition with your overall growth strategy and completing a thorough due diligence review, you are ready to move to the next stage, finalising the contracts.

At this stage, you will want to ensure the terms of the contract reflect the original agreement and items negotiated earlier in the acquisition process. All key terms which were previously agreed should be included in the contract.

As a purchaser, it is also important to ensure the contract includes reasonable indemnity and liability clauses to protect you against any issues that may arise post-acquisition. Additionally, adequate restraint provisions, such as non-compete and non-solicitation clauses, should also be included to protect the ongoing value of the business after the acquisition.

What’s next?

If you are ready to scale your business through an acquisition, please reach out to one of our experienced legal advisors who can help guide you through the entire process; from negotiating terms, undertaking due diligence, right up to completing the acquisition, to help you minimise any risks and set you up for long-term success.