M&A Blog Petr D.

Acquiring a Company: Initial Steps

Acquiring a company necessitates a clear objective, meticulous selection, thorough research, outreach to business owners, securing financing, conducting due diligence, and high-quality transactional documentation.

Acquiring a Company: Initial Steps

 

By acquiring a company, you can invest in your future income and elevate your business to the next level. The motivation for acquiring a company may also include expanding your investment or business portfolio into new, unexplored markets. The process of acquiring a company is not entirely straightforward, which is why we aim to guide you through it in our two-part series.

 

Clarifying Your Objective is Essential

Before you begin selecting a target company, it is crucial to define what you expect from your future investment. Will you focus on a specific business sector, high revenues, or the location of the company? When determining the basic parameters of the company, it is advisable to clarify how long you intend to invest. The money you invest often takes several years to return, and investments with a time horizon of several decades are not uncommon. Therefore, it is also important to determine whether your goal is to enhance the company’s value and subsequently sell it, or to continue its operations and participate in its regular profits.

 

Searching, Searching, All Sorrows Dispelled

Once you have established your objective and investment time frame, it is time to move on to the specific search for a suitable company. You can utilize our platform, AcquireDock, to search for companies that meet your criteria. For the companies you identify, it is essential to assess their financial health to ensure you do not overlook any significant deficiencies that could deter you from proceeding with the acquisition. This primarily means verifying financial statements (from which you can learn a lot about the company’s profitability or lack thereof), as well as annual reports available in the Collection of Documents. Additionally, it is advisable to focus on the company’s website and the members of its statutory body. This research will help you filter potential candidates for acquisition, making it crucial not to skip this step.

 

Do Not Hesitate to Reach Out to Owners!

After conducting your initial research to filter suitable companies for acquisition, the next inevitable step is to contact the owners of the companies you have selected, aiming for a personal meeting. From these meetings, you should gather impressions of the owners and the company’s management system, as well as some basic facts about the company, such as key clients/customers, supplier information, and detailed insights into the ownership structure, among others.

 

I Choose You!

After completing all the aforementioned steps with several selected candidates, you should proceed to the final selection. You have gathered enough information from both the initial research and personal meetings with the owners; now it is necessary to evaluate the positive and negative aspects of all the companies that passed the first selection. After assessing the most suitable candidates, you should select several companies with which you will begin intensive negotiations. It is advisable not to limit yourself to just one company, as negotiations for an acquisition can often reach a standstill, so it is always good to have an alternative.

 

The Acquisition Phase Follows, Which We Will Discuss in Part 2 Titled “I Have Chosen a Company, What Now?”