Autumn Budget 2025
Acquiring a business is always exciting as you prepare to start a new chapter and take that business to new heights, but the acquisition process isn’t always smooth and at times can be challenging.
However, we have outlined five important tips that will help you build an understanding of the company itself and provide a smoother transaction process.
Preparation is key
The more prepared you are, the easier the acquisition should be. The timeline of an acquisition can change for various circumstances and you need to prepare for every eventuality.
You need to check you have the funds ready, have the people in place to advise, guide and help you complete the acquisition.
Being prepared also allows you to mitigate any challenges that arise, such as cash flow concerns, which may impact your ability to complete the acquisition.
It allows you to address the challenges and update all parties.
There is also post-completion to think about because once the deal is finalised, you need to be ready for the handover phase, where you can begin to implement your ideas, culture and plans for the future.
Completing effective due diligence
You need to learn as much about the company as possible and this is where effective due diligence is needed.
Every aspect of the business, from how it started to its current offering, the market space it’s working in and its intended target audience for its products and services.
Your research should take you to the company’s website, any social media accounts, any content released through the media and all details and filing information on the Companies House website.
Being on Companies House means you should be able to review its recent financial reports and submissions with HM Revenue and Customs (HMRC).
This will give you insight into its recent performance while showing the business is credible.
The foundations of any deal are the finances involved and during the due diligence process, you need to be thorough to avoid any mistakes and build a clear picture of the company’s financial position.
Before you start the due diligence process, you should speak with legal experts to discuss the purpose of the acquisition so you can define a due diligence scope.
Defining the scope helps you clarify what you are purchasing, whether it’s the shared capital or the business and its assets, are there any liabilities or excluded assets.
This will help you conduct more targeted due diligence.
The due diligence process should also see you complete an extensive review of the company’s financial records, looking at its annual accounts, tax returns and bank data. Review any third-party contracts and agreements and any employment issues.
You need to build as much information as you can during the due diligence process, so don’t be afraid to ask pressing questions to the seller, including any previous legal disputes that you see.
The due diligence process should take as long as it needs and don’t handle it on your own.
Get lawyers to support early so they can guide and support you and create a thorough final report that outlines clear steps to be actioned.
Create a heads of terms
Any acquisition should see a heads of terms or letter of intent created.
This document outlines how the two parties involved will work together, clarifying each person’s role in supporting the deal.
A head of terms demonstrates commitment from both sides, maintains a focus and provides an accessible, concise document that can be updated when necessary to reflect agreed terms and push negotiations forward.
Drafting a head of terms document will help reduce the risk of the deal falling through because both parties should know the expectations and what needs to happen.
The legally binding aspect of a heads of terms is delicate, which is why it’s best to consult solicitors when putting one together. It will become legally binding if the head of terms applies legal contract formation principles, but you should decide from the outset if you want the head of terms to be a legally binding agreement.
Align yourself with the company’s culture
A successful acquisition cannot happen if you are not aligned with the company, you are in discussions with.
Naturally, you will have your own vision for the business, but as your understanding builds, you will learn more about the current hierarchy and the employees working hard to drive the business forward.
You cannot go into an acquisition with an all about yourself mentality, you need to immerse yourself in the company and use terms like “us” and “we”.
The language you use and communicate with will build confidence, excitement, belief and reassurance, particularly for employees who will be worried about their future once a deal is completed.
It shows your intentions and your commitment to the company and its people and should help the acquisition process with the seller move much more smoothly.
Always consult a legal expert
Acquisitions can be complex in nature, so it never hurts to speak with solicitors and legal experts.
They can discuss the potential deal in length, support with the due diligence process, help draft a head of terms document and put measures in place so that you are prepared to complete the deal.
They will help you understand your legal rights, the legal details that must be included in your agreement and they can complete the legal necessities for the deal to be finalised.
For support with completing an acquisition, contact our team today.
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