A business acquisition is about much more than determining a good price. At least as decisive are the factors that break or make the process: the dealbreakers who cause uncertainty or distrust and the dealmakers who ensure trust and continuity.
Having an understanding of these elements is essential to prevent a transaction from stranding and to significantly increase the likelihood of sustainable success.
Dealbreakers: where does it go wrong?
Equity value & deal structure
A common source of discussion is the translation of enterprise value to equity value via the so-called equity bridge. This is where differences of opinion often arise as to what the correct calculation is, which can lead to many discussions.
The deal structure also frequently proves to be a stumbling block. Is the purchase price paid all at once or is a portion paid later? Will the seller temporarily remain a shareholder and/or provide a loan? Such choices affect the risk for both buyer and seller as well as their feelings about the deal.
Operational & legal
Even when parties agree on the share value and deal structure, other pitfalls can still throw a spanner in the works. Messy administration, unclear or missing reports, a non-standard legal structure or ongoing disputes often give a buyer the feeling that there may be hidden problems in the company.
A lack of transparent documentation or a cultural mismatch can also undermine trust and sink a deal.
Strategic & risk profile
The company's risk profile also plays an important role. High dependence on one customer, supplier, product or key person increases the risk of loss of sales or discontinuity after acquisition, making the company less attractive to buyers.
Human & relational
Finally, trust between parties is crucial. A lack of communication or mutual respect can disrupt the atmosphere and even sink a well-thought-out deal. A good acquisition advisor helps keep the process on track and guards the relationship between parties.
Dealmakers: the building blocks for success!
Preparation
Good preparation makes all the difference. Sellers who make their business "sale-ready" have insight into the company-specific risks. This builds confidence with buyers and prevents endless discussions.
Results & forecasts
Stable historical results increase a company's attractiveness. Forecasts that are realistic and consistent with both historical figures and market expectations boost buyer confidence.
Independent management team
In addition, an independent management team is a big plus. It gives the buyer confidence that the business can continue to thrive without the current owner.
Relationship & trust
And perhaps most importantly, be tough on substance, but soft on relationship. At the end of the day, a deal is made not only based on numbers, but also on trust and feelings.
