Why you need an acquisition plan

Even seasoned, serial entrepreneurs understand that buying another business is too significant an undertaking to run it all spontaneously. Each distinct part of the acquisition process can easily get complicated and involved, often requiring teams of specialists to complete. It is important to take a firm hand in the leadership of the overall process to delineate roles and responsibilities, keep the process on target and to ensure costs are contained within budgets.

All the while, the day-to-day operations of the acquirer business and the target must not be adversely affected by distracted management and hip-firing management decisions (most commonly including premature staff reorganisation). This applies both before and after the deal is signed.

The considerations are many and include price negotiation, achieving the correct tax treatment, legal processes, decisions about accompanying property and formulating strategies to integrate the new business into an existing company.

Creating an acquisition plan is a useful process to review these factors and determine how to deal with them in a cost effective and time efficient manner. Once the plan is finished, the business buyer will have his own valuable research and analysis to guide the acquisition or merger process.

Start preparing the plan during the formal due diligence stage, so that you have a finished plan ready for action when the deal completion takes place. A business acquisition plan will, of course, differ depending on the circumstances but below are the main steps to consider when writing up a document to guide a purchase:

The business description should include the legal business description of the existing company and details of the intention to buy another business. Provide details of the other firm’s history, financial health, staff numbers, location and legal business description, and its goals and projections.

List the existing staff and their roles, as well as the employees being acquired and explain their roles in the newly enlarged business. Calculate the additional employment costs such as payroll, training and benefits. Try to understand what the effects on staff morale and sales will be if management redundancies are being planned.

Identify the locations where the original business operates from, then the locations and details of any property being inherited in the deal. Show how the additional properties (and equipment) will be used and the costs involved, including taxes.

Review any potential difficulties resulting from the purchase, which may relate to customer expectations and industry competition for example. Create strategies to deal with the difficulties and explore how to best utilise the underlying advantages they may bring.

Understand the information technology infrastructure of the target company, identify potential integration problems and create a timeline and budget for bringing the respective systems into line.

Provide details about the services and products the business will concentrate on post-acquisition. List the existing and new products and services. Include the methods and costs involved in the business merger. Show any new products or services that may be created out of the move and list any equipment that will be needed.

Identify the original target market for the business and describe how this may change after the purchase. Show how the business will keep its usual customers and meet the needs of any acquired and new clients.

Include financial information to show the activity of the existing business over the past three years. Also provide a balance sheet, income and cash flow statements for the business shortly after the acquisition. Be reasonable, rather than overly optimistic, with forecasts for the future financial performance. Pay particular attention to cash flow forecasts for the combined operation and work out contingency strategies, should the cash flows fall short of predictions.

Summarise by introducing the new products and services the merged business will offer, its target markets, and also review the trends in the sector. Recap the reasons for the deal, and show how it will benefit the original company.

Finally, enclose the deal contract and any further supporting documents, such as lease agreements, in the appendix of the plan.

Present the business acquisition plan clearly, with tidy, professional looking formatting and a contents page.

Store the plan securely, whether on proprietary servers or on a cloud service. Back up copies at regular intervals, especially if collaborative and editing access is being granted to other directors.

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