Successfully managing an acquisition from start to finish
The importance of teaming with experts
Acquire a business
Successfully managing an acquisition before, during and after the transaction
Managing an acquisition is not limited to transactional agreements. The planning starts several months, even several years before the sale. One of the first things to consider is the importance of building a qualified team to help with the integration of a new company. It is also important to determine if a transaction fits into the company’s overall strategy. This team (or committee) will be able to analyze the variables of such a transaction, by evaluating the company’s growing responsibilities and financial capacities or its systems.
Once this initial step has been completed, the committee is able to draw up a detailed development plan to ensure that the transaction will be a growth driver for your business. Here are a few tips for making your acquisition a success.
ALWAYS: Choose your advisors wisely
Whether you’re looking for recommendations for an acquisition or guidance during a merger, it pays to seek out experts at all stages of the process. Because success at this initial step is primarily in the company’s hands, proper preparation and support from seasoned partners are paramount. Setting up an advisory committee will help you successfully complete each stage of the transaction. Such committees are usually composed of four to six experienced business professionals with a wide range of profiles and skills, yet who also are complementary to and compatible with your organization.
The Groupement des chefs d’entreprise du Québec has created a list of criteria to help you select the members of your advisory committee. The members should:
- Lead a company that is larger than your own (vision).
- Be generalists and their key areas of expertise (finance, marketing, human resources and so on) should complement your own;
- Have relevant experience in the areas you need to develop further (exports, administration, etc.).
- Possess the following: strong listening and critical thinking skills, sound judgment and a collaborative style.
- Be members of several committees (this is not mandatory, but would be a key advantage).
This advisory committee, which meets regularly, discusses human issues such as talent attraction and retention strategies, or financial and organizational issues, such as understanding the target market. It also looks at the strategic plan and the actions required for its successful implementation. The committee’s collaborative support is invaluable at each step in the acquisition of a company and every stage of its growth.
BEFORE: Preparation and analysis
The first step in the acquisition consists in determining the profile of the ideal buyer in terms of operations, size and geographic location. At this stage, it is also important to ensure the companies being considered reflect your values.
Meeting with many potential buyers or “transferees” is an excellent way of refining your search. Your advisory committee and fund managers are two reliable sources for finding potential transferees. The Centre de transfert d’entreprises du Québec (CTEQ) has also created the Index—a platform that allows you to search its index of transferees by various criteria, such by sector or region. https://ctequebec.com/lindex/).
Risk assessment is also a key area to consider in the preparation and analysis phase. While most entrepreneurs are well acquainted with their market, they often lack the right tools to identify the issues that may arise. All the more reason to choose your advisors wisely.
“A number of issues can have a major impact on a company’s profitability. For instance, managing environmental challenges is new to a lot of entrepreneurs. With the support of an experienced partner, buyers can target key issues and work with the sellers to resolve them to avoid any unpleasant surprises at acquisition time,” says Sylvain Dupuis, formely Managing Vice-President, Investments at Desjardins Capital.
DURING: Financing and transfer
“Entrepreneurs often tend to prefer debt rather than equity solutions, which impacts their ability to drive company development, as they’re caught up with debt repayments,” adds Sylvain Dupuis.
This is where a fund manager can help by financing a portion of the acquisition transaction. However, to promote the company’s growth and long-term viability, the proposed financing structure must still afford buyers the flexibility to inject capital to grow the company, rather than merely repay the debt incurred from the acquisition.
Since financial performance often falls shy of expectations in the first few quarters after the acquisition, selecting a patient partner well acquainted with such challenges is of the utmost importance. Strategic guidance means playing the long game, and it’s important to feel you are being supported throughout the transitional period.
AFTER: Development and vision
As part of an acquisition, you obviously need to manage the transaction, but you also have to prepare for what happens after the acquisition. Both elements need to be worked on in parallel.
The initial years following an acquisition are crucial to the success of a company. Many challenges can arise simultaneously. “When the entrepreneur changes, the company culture changes. Employees are a bit disrupted and there are shifts within the organization,” explains Sylvain Dupuis.
The implementation of a management structure allowing for the integration of values and human capital is fundamental to ensuring the success of the company’s activities. “Entrepreneurs can be helped by encouraging them and putting them in touch with people who have gone through similar situations in comparable sectors of activity. The idea is to ensure that once the cheque is deposited, the entrepreneur will feel engaged because they already know what they need to do,” adds Sylvain Dupuis.
With this support, entrepreneurs have increased latitude for switching into strategic mode since they are not overburdened with day-to-day concerns. This means they can continue to pursue their work as visionaries and drive toward success, and perhaps even start thinking about who will take over the reins after them.
NOTE: Communication is always key, especially when it comes to the employees (both the employees from the targeted company as well as those from the purchasing company); it is important to never underestimate the effect such a change can have on individuals.