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Acquisitions - How to make a return…(Part 4)

I have blogged in the past on Mercer & Hole's achievements in making acquisitions. We have acquired whole departments from international accounting firms, and have successfully integrated these staff and their clients into our ethos of ‘Big firm expertise with a personal service’. There are many risks involved in buying a company, and the likelihood of failure is surprisingly high.

In my last blog a week or so ago, I had taken our hypothetical acquisition to an offer being accepted. At this point, the action intensifies. Accountants are appointed to undertake Financial Due Diligence and Lawyers for the Legal Due Diligence. In some deals you may also need commercial, pensions, environmental and IT Diligence. 

I always recommend that a key member(s) of the acquirers internal management are heavily involved in commercial and operational issues with the vendor - external advisers should not be trusted with everything, and the more involved you are, the easier it is for decisions to be made quickly as the deal progresses.

Once the results of Due Diligence are collated, another round of negotiations / horse trading commences. There is still a ‘not in-significant’ likelihood that a deal will fail at this point, particularly if unexpected problems have been found - the seller could have been given unrealistic expectations and may not compromise on the price.

Good Due Diligence is crucial to protect your interests - in simple terms it tests the assumptions the buyer has made regarding the acquisition. I have yet to be involved in a deal where it does not identify an issue of relevance. A good accountant and lawyer are worth their weight in gold!

 

 

Date: 3rd February, 2009
Author: Julian Dobbin

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