The season for acquisitions is upon us again and there is a notable increased level of activity in client base acquisitions over 2012.
You may have been successful in your negotiations with a vendor, however, don’t celebrate just yet as one of the main reasons that acquisitions are failing at the moment is that buyers are experiencing some surprises when they approach a lender for funding.
With more stock on the market to work your way through to find the right acquisition opportunity it becomes important that you get yourself “acquisition ready” prior to entering into negotiations on a potential acquisition.
There are three key issues when looking to acquire:
- Capacity to acquire
- How will your existing business be impacted
- Getting your house in order
CAPACITY
If you have started negotiating with a vendor on an acquisition, do you understand your capacity to fund this potential acquisition?
Do you know what a potential funder will lend against your business as well as the acquisition target?
If not, then you need to find out prior to submitting an indicative offer as being a qualified buyer can add weight to your indicative offer over that of an unqualified buyer.
All lenders provide funding to financial planners and accountants using different metrics and your existing bank may not even be in the market for lending to financial planners and accountants!
IMPACT
When you make an acquisition you will be bringing in clients and possibly staff that do not know how you do business or the culture in your business.
How will your existing business infrastructure cope with an acquisition?
- Will you need to move premises to accommodate any additional staff?
- Will your IT infrastructure cope with the merging of client database?
- Will you need to change your staffing mix and job descriptions?
This can have a severe impact on your existing business if you get it wrong. Plan ahead to eliminate this risk.
HOUSE IN ORDER
Do you have your house in order?
For funding from a bank to potentially be available for an acquisition you need to have your house in order.
- Are your statutory liabilities (GST, Super, PAYG obligations) up to date? Not just the current quarter but also for the previous 9-12 months
- Account conduct – it will be checked for a minimum of the last 6 months and needs to be clean with no dishonours or excesses
- Is your client base segmented and can you provide this data easily?
- Do you know your numbers?
Tis the season to be acquiring. Best of luck with your acquisition plans.
