Making a preliminary offer and negotiations
Once the acquirer has met the target and reviewed the financial information available, they may be in a position to make a formal offer.
At this stage, the valuation of the targets will need to be considered in detail. We will be able to provide guidance on current methodologies and multiples.
It is crucial that the terms of this offer are clear, otherwise it is more difficult to adjust the price for issues identified during Due Diligence. There are several important areas which are regularly overlooked when making an offer – these include working capital adjustments and owners/management remuneration levels. The offer should also make clear the period of exclusivity, and the buyers expectations on timing.
There are likely to be further negotiations following the initial offer, and Mercer & Hole can help manage this process. It is not just an acceptable price for the business which signifies a ‘good deal’ – negotiating other favourable terms can be just as important. The offer will be formally documented in Heads-of-Terms or a Letter-of-Intent.
Whether you have been involved in ‘more deals than you care to remember’ or if this is your first time – having support throughout the negotiations is crucial to protecting your position and generating additional value from an acquisition.