Overview
On a macro overview of the U.K. we have already seen the M&A data was very strong both from an inward and domestic level in 2021. Especially during Q2, where the U.K. broke all time highs to set a new record for the number of completed M&A ventures taking place. This trend is due to many factors that business owners are now starting to feel the affect of and need strategise accordingly. As national economics change and industries look to evolve, M&A is seen as a key driver to improve; economies scale, diversify current products or services and solidify medium to long-term growth plans.
In today’s market place there are endless investment opportunities with existing businesses for sale that are strong both operationally and financially. It takes an entrepreneurial mindset to grow that existing business with a new product line-up or evolve the current setup to be even more efficient and profitable. With this mind, when buying a uk business consider the below core categories:
SECTOR SPECIFIC CATEGORIES
Legal advice
During any acquisition when reviewing various businesses for sale the legalities will be fundamental throughout the whole process. You will need professional advice and a team that specialises in M&A deals. Note their job is to protect the client and with this in mind, they will highlight all issues that arise. It is your decision to workout if these issues raised, will be deal breakers or possibly restructure it.
Ultimately, there are two ways to structure a deal and that is either through the assets or shares of the business. Knowing what the seller is wanting to achieve from the outset will set the tone of the negotiations.
As you progress through the various stages or an acquisition there will be multiple areas that need to be discussed and negotiated. Some examples would include; Intellectual property rights, consents and third party approvals, employment, key staff retention packages and pension schemes.
Finally, the below documents will be provided when buying a uk business. Make sure your legal team have reviewed these and you understand all the legal obligations:
- Disclosure letter
- Heads of terms
- Confidentiality agreement
- Exclusivity agreement
- Due diligence documents
Finance
When buying a UK business, the accounts will undeniably be a focal point to negotiations and your decision process. As a result, when carrying out any M&A due diligence you should seek professional advice to understand financial documents and the acquisition process.
It is worth noting that when going through an acquisition process this will impact the financials. A side from the potential liquidity impact, various financial ratios including; leveraged ratio, profitability ratio and activity ratio are all worth understanding to get some sort of prediction and steer on what the financial situation will look like prior and post acquisition.
Nevertheless, there are some metrics you can gather yourself to identify the financial position of a company. Some questions you may want to consider when reviewing businesses for sale:
- What are the liability costs?
- Can the cost of expenses be improved?
- What is the companies EBITDA?
- What has been the gross and net income over the last 1- 5 years?
- Are there anomalies that make you question the financials?
Research
Research specific to the industry that the target company is based within, will be very valuable as you navigate through the acquisition process. However, look to get a balanced guide by comparing any internal factors the company may have as well. Furthermore, it might open up more conversations and ideas on new products or automation processes that could streamline the business further.
As a result, you will start to have a clear picture on whether this M&A opportunity meets your business objectives before buying a uk business. Visit our 'Industry' section by clicking the link below and select one of the relevant industries, to help kickstart the research process.
Employees
The immediate post acquisition plan, as it has been highlighted above, will help reset any negative factors and give way to new opportunities for staff. However, businesses for sale can have a large impact especially for the staff involved. Remember to seek professional HR guidance so staff are treated fairly and can adjust to these changing circumstances.
During negotiations of buying a uk business with the current owner, staff levels will be discussed and commitments maybe asked. You will need to have a clear response and on this topic, so both parties have a mutual understanding.
Recognising talent within the organisation will be critical in making sure if the acquisition completes, you retain these members of staff. They might be in different departments or have specific skillsets but from this pool of people you will need some to have the right soft skills, which can deliver the message on the new strategy you plan to implement. This is not a simple tick box exercise and getting to know staff beforehand should be high on your own personal agenda.
Finally, make sure employees are aware of the M&A before any news breaks. Staff trend to be more accepting of the news if an internal presentation is given, rather than it coming from a third party provider.
Post acquisition plan
When buying a UK business refer back to your m&a due diligence on the target company, where you would have researched the industry and clarified any immediate competitor analysis. This will help draft a suitable strategic plan if you do acquire the business. During this phase clearly define some short and mid-term objectives that you can deliver post acquisition. Consider a clearly defined message, with relevant KPIs that selected staff will help in delivering.
Reaffirming any day-to-day processes will be a key element in providing continuity for staff. However, this is an opportunity to reset any negative factors and help manage their expectation going forward. Encourage employees to share any social media or news publications and most importantly reach out to existing clients from both companies to explain the acquisition. This will also give you a moment to address any concerns but also illustrate the added value this new venture will bring.