Expert opinion

5 things to look for in a business you’ve targeted for acquisition

Myles Hamilton, Director and M&A specialist at Shaw & Co, explains some of the things that prospective buyers often overlook when trying to buy a business.

3 minutes
March 18, 2022
Words:
Myles Hamilton
Images:
Tim Gander Photography
PDF:
Report

1 - Synergies

When looking to acquire a business, it’s important that you really analyse potential synergies with the target organisation if you are to fully understand its value and how much it is worth – or potentially worth – to you. For example, can you add revenue to the business by selling its products or services to your current client base? Does it enhance your offering and enable you to charge more? Will it help facilitate savings in terms of procurement or the co-location of offices?

2 - Change of Control

How will employees and clients react to new ownership? An exodus in either case would obviously be disastrous, so it is vital to gauge staff morale and key client and customer relationships before the deal is done. Change of control clauses are standard practice in contracts so it is important to be assured that they won’t be used.

3 - Ownership of IP

Does your target acquisition have full ownership of the various trademarks, patents etc association with its brand, its products etc? Over the years we have been surprised at how many companies don’t.

Myles Hamilton - M&A expert at Shaw & Co
Myles Hamilton - M&A expert at Shaw & Co

4 - Share Buybacks

When companies buy back their shares the legal details are often overlooked, potentially invalidating the transfer and leaving a question mark over who actually owns the shares. Be careful and seek good legal advice if contemplating a share buyback. If you have carried out a share buyback in the past and you are unsure, get a lawyer to review the paperwork sooner rather than later.

5 - Owner Remuneration

Is the current owner paying themselves a small salary and taking a large dividend or vice versa? The profit you are looking at in the accounts may be materially different to the underlying profit when remuneration is calculated on an arm's length basis.

We work with UK SMEs and small-cap PLCs that have the ambition to grow their business by acquisition. We often act as an outsourced Corporate Development team helping clients meet their strategic goals through mergers and acquisitions. Our value lies in helping clients build rigour into the acquisition search and execution process. For a confidential, independent, no obligation discussion on how to buy a business, click the 'Let's chat' button.
Words:
Myles Hamilton
 - 
Director
Read 
Myles Hamilton
's bio

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