Finding the right acquisition target

Research suggests many acquisitions fail to add the value expected by the purchaser – sometimes because inadequate steps have been taken to identify a suitable acquisition target.

Your first move should be to compile a shortlist comprising the sort of firm you want in terms of market sector; size of the potential target; and products or services that will fit with your own.

Often the answer is closer to home than you might imagine and you should look at companies you already do business with. Many deals are done between companies that know each other through a pre-existing commercial relationship.

Another important research tool is your senior management team. Ask them to use their network of contacts to obtain information about prospective candidates – discreetly, of course.

Investment banks, accountants, commercial law firms and standalone corporate finance firms, and are usually the most effective way to identify an acquisition target. If you have not been through the acquisition process before, it is strongly recommended that you consult professional advisers early on.

You should make sure your advisers have the necessary experience in completing deals of a similar size and nature to the one you are contemplating.

It is common practice for corporate finance advisers to provide a shortlist of potential targets, some of whom will be known to the adviser. Usually, you pay most of the adviser’s fee when the acquisition has been completed.

If you would like to discuss this or any other mergers and acquisitions matter, please contact David Filmer on 01772 258321, or at david.filmer@harrison-drury.com