As a DGA, you are busy with your business every day. But how often do you think about the long term? Where do you want your company to be in five or ten years?
Jan Dekker and Sharon van Brederode of Coralis Corporate Finance advise companies in purchase and sale transactions. Jan indicates, "As a DGA, think regularly about your growth strategy. Can you grow on your own or do you want to accelerate growth by making an acquisition?' Sharon adds, "Growth through acquisitions is a structured process. Every acquisition goes through a number of phases.'
Phase 1: The dot on the horizon
Jan emphasizes the "dot on the horizon": Where do you want to work toward? There are two extremes for your business strategy: do you want to distinguish yourself with a superior product, and can you earn an extra margin from that, or do you want to steer towards cost efficiency, and benefit from scale?'
Phase 2: Strategic goals
If you are going with your business on a strategy to differentiate yourself with your product, how do you want to grow in it? Do you want revenue growth, or margin improvement? Perhaps you need to embrace a new technology. Sharon: "On the other hand, if your strategy focuses on cost efficiency, you probably need to scale up. So you can take advantage of lower procurement costs or higher capacity utilization.'
Phase 3: The buyer profile
Once you have established your strategic goals, you then determine whether you can achieve them on your own or whether you would want or need to make an acquisition to do so. If you choose the latter, it is important to draw up the sharpest possible buyer profile: what activities are you looking for, with what size or with what type of customers.
Phase 4: Longlist and shortlist
To determine suitable acquisition candidates, we draw on several sources. To begin with, as an entrepreneur you undoubtedly already have your own business or several businesses in mind. In addition, we research the offerings on platforms, such as Brookz or Dealsuite, and also look at other corporate finance parties, investors and industry associations. This is how we arrive at a shortlist of a limited number of parties.
Phase 5: In conversation
The businesses on our shortlist are not all for sale. For the businesses that are for sale, we sign an NDA (the confidentiality agreement) after which we receive the information memorandum. For the businesses that are not for sale, we need to proceed wisely. After all, chances are the DGA is not concerned with possibly selling the company. If there is a willingness to talk further, we sign an NDA and request the necessary information.
Phase 6: Making an offer
Based on the information received and our own analysis, we determine the negotiation strategy. What is the company's maximum value to us and what will be our opening offer?
Phase 7: Negotiations
The negotiation phase has arrived, with the goal of finding agreement on price, date, form of payment, seller involvement and due diligence. We record this in an LOI, the letter of intent.
Phase 8: Financing
Even before we have signed the LOI, we start preparations for the financing application. This phase takes time and can take up to 8 weeks.
Phase 9: Due diligence
In this phase, the specialists will investigate for you whether the supplied information is correct and identify the legal, fiscal and HR risks of the company. If any unexpected setbacks or substantial risks emerge from these investigations, we will determine whether our offer still needs to be adjusted.
Phase 10: Closing
Once the DD investigation and any final negotiations have been completed, we will prepare the transaction documentation. This involves the purchase agreement (so-called share purchase agreement) and any additional documentation. Finally, at the notary, the shares are delivered.
Sharon: 'On average then, we have been busy for 9 months to a year. Now the growth strategy can be fleshed out!'
