Acquisition Strategy

Having established that an acquisition is the best way forward, the first key step is to develop a one-page Acquisition Profile, describing the characteristics that a target company must possess to fit your strategic goals. In particular, the following areas should be addressed:

  • Nature of products and services;
  • Minimum levels of turnover and profitability;
  • Minimum market share and growth prospects;
  • Types of customers and nature of relationships; acceptable dependency on individual customer and suppliers;
  • Location and geographic coverage;
  • Opportunity for rationalisation and integration;
  • Management continuity.

In addition, the Acquisition Profile should address the type of deal you consider appropriate, for example:

  • Minimum and maximum deal values;
  • Maximum proportion of goodwill payable at legal completion;
  • Form of consideration: cash and/or shares;
  • Availability of loan notes as an alternative; and
  • Desirability of earn-outs or deferred consideration.
The Acquisition Profile provides the basis for the individual executive to seek and obtain board approval for the acquisition strategy. Without such approval, delay, embarrassment and loss of credibility may result later. The Profile is the principal reference point 'a template' against which any possible acquisition targets should be assessed.

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