Buying a company?

Buying a business is never easy and the process is often very time-consuming and stressful for the buyer. If you already own your own business, you want it to run smoothly during the acquisition process. To make the purchase of a business as smooth and as business-friendly as possible, it is highly advisable to involve a financial expert in the process to help us through the acquisition process – and most importantly: to warn us of the risks that will arise along the way when acquiring a company.

What are the tasks of a financial advisor when buying a business? 

A financial advisor is involved in several activities during the process of buying a company, including:

• Project management
• Due diligence support
• Valuation
• Structuring the transaction
• Acquirer positioning and market intelligence
• Negotiation support

Project management

Buying a business always starts with a clear project management plan. The financial advisor sets the timeline and the course of the project and helps the buyer to select the other advisors that need to be involved in the transaction. In addition, the financial advisor helps to coordinate their activities.

Due diligence

The financial advisor is also involved in the due diligence process, which provides the client with an understanding of the target’s business and financial risks. The financial advisor will work with other advisors to identify business, financial, tax and legal risks related to the company’s past performance, which are often hidden from the untrained eye of the reviewer. Once due diligence is completed, the adviser will inform the client of the material risks and weaknesses of the target or transaction.

Valuation

As part of the valuation, the consultant evaluates the value of the target, selecting the model that is most appropriate to the business or activity of the company and best reflects its real value. The consultant will report to the acquirer on the range of the target’s value, while incorporating the value adjustments from the due diligence findings into the financial model.

Transaction structuring

The valuation is followed by the transaction structuring phase. In this phase, the adviser advises on the appropriate structure of the transaction that will be both suitable for the acquirer and acceptable to the target company. This is an important assessment, answering questions such as how to finance the acquisition, whether to buy a qualifying stake or a controlling stake, decisions on the method and timing of payment of the purchase price, decisions on future cooperation with the target’s existing management, etc. The financial advisor, in cooperation with legal advisors, highlights the potential risks and issues that a particular transaction structure may raise.

Acquirer positioning and market intelligence

Market enquiries are the longest part of the process of buying a company. The advisor will take care of introductions of the buyer as a suitable potential partner to the target company and the other relevant stakeholders. Meeting arrangements will be made aimed at promoting the buyer. In addition, an effor will be made to identify competitors that may also have an acquisition appetite for the target company and advisor will analyse their competitive position. Of course, it is also very important that the financial advisor keeps the buyer regularly informed of news, especially market information, related to the target company or the transaction.

Negotiation support

The last part of the process of buying a comapny, where an advisor helps, is the negotiation support. Negotiations are considered the most complex part of the process and support for the buyer is crucial here. The financial advisor will be present during the actual negotiations with the owners of the target company and will try to secure the most favourable terms for the transaction. The advisor will support the buyer and its legal experts in drafting and amending the share and purchase agreement (SPA) and other legal documentation, such as a non-disclosure agreement (NDA) or other supplementary agreements.