The value of mergers and acquisitions in the UK is the highest since 2007, with car, healthcare and telecommunications companies seeing the highest value deals, according to an EY report. Here, Adam Binks, CEO of SysGroup explains the top six things to be aware of when acquiring a company.
Look for synergies
He says that when approaching an acquisition, a good starting point is to look at target companies that have synergies with your business, whether that is client base or expertise, geography or otherwise.
‘Look at the synergy in terms of culture and team structures and get a good feel early on for the people in the target business who will be crucial to the acquisition delivering the right results.
‘Think about who has the client relationships or technical know how you are essentially buying and how will they fit with the merged business so that picture is clear as early as possible.’
Do your homework
Thorough due diligence is worth its weight in gold and the earlier you can get a due diligence report the better.
‘There will always be skeletons in the closet and uncovering challenges as early on in the process as possible will give you a fighting chance of overcoming them – or allow you to walk away, saving you time and money if the acquisition isn’t right.’
Don’t try and do it all yourself
When it comes to significant business acquisitions you tend to get what you pay for, with acquisition experience the most vital thing to consider when hiring advisors.
Binks adds, ‘Surrounding yourself with the best people to be your eyes and ears ultimately allows them to manage risk for you and although this can cost money, investing in sound advice will ensure the deal stays on track.
‘Potential future tax liabilities is a good example of a possible pitfall and a good advisor will help you to get a grip of it as early as possible.’
Take a step back
He says that acquiring a company is often an emotional experience for the company owner as it stimulates the ego. Thus, a moment to step back at key milestones is crucial. ‘It’s easy to get caught up in the race to finish line, but don’t be afraid to take time to assess if the deal is still what you set out for it to be at key stages in the process.’
Communication is king
Binks says that acquisitions take place behind closed doors to a point for obvious reasons, but ‘there’s no reason why you can’t plan ahead and invest in the communications required to strengthen the transition.’
‘Take care to go through the communications plan with a fine-tooth comb. Remember your existing business will change as a result and that needs the same care as the business being acquired.
‘Time can be tight when announcing an acquisition – especially in the plc world, so having a robust plan in place along with a good set of pre-empted questions and answers will save time and allow you to focus on delivering rather than fire-fighting.’
Power to the people
An acquisition means change, which can worry people and be unsettling.
‘Good communications as set out above will go a long way to helping people to cope with that change, but ultimately everyone will care about how the change affects them and want to understand that.
‘As a leader of the business it is really important to be visible and work closely with your teams to provide reassurance and ensure questions are being answered transparently and efficiently.’
A brand-new world
‘In some cases, acquisitions will mean amalgamating or replacing a brand’, Binks says. ‘Again, care needs to be taken about how and when this is done.’
‘Brand loyalty internally and with customers shouldn’t be underestimated and having internal ambassadors on board to help deliver the changes can be a powerful tactic. Brand changes are also a great opportunity to re-align your values and look to the future inclusively across the whole business so use this as an opportunity to take people on that journey with you.’
Acquisitions mean change and with change brings challenges. Binks says that he thrived in the ‘momentum that a deal builds over time’ such as the acquisition and merger of Rockford IT in November 2017, ‘but it’s really important to remember everyone in the business will feel that change quickly and with that may come resistance.’
From experience, as long as the future picture is clear and the people you have within your leadership team are supporting you to drive the change required, acquisitions should be a rewarding experience for everyone involved, not just the shareholders.