The Costly Mistake in SME Acquisitions
Rich Olsen, an accredited UKBA advisor, helps SME owners find funding solutions to secure acquisitions. But there’s one costly mistake that he has to unravel time and again. Here’s his take on why deals go wrong and how to do it the right way.
Why Deals Move Faster Than Funding
Ambitious business owners often move quickly when an acquisition opportunity arises. They negotiate terms, invest time and professional fees, and reach Heads of Terms with confidence. Only then do they fully test the funding position.
Agreeing a deal before understanding what you can realistically borrow is often an expensive mistake.
When Funding Reality Catches Up
Unfortunately, the satisfaction of reaching Heads of Terms quickly evaporates when funding conversations begin. Lenders review detailed financial and commercial information, and it can be a shock when funding doesn’t meet the completion payment figures. The seller now has fixed expectations so if additional cash isn’t available, the deal stalls or collapses completely.
Why This Approach Happens
Often owners take this approach because they’ve followed poor advice. Certain acquisition specialists encourage an approach based on confidence first and funding later. This is a high-risk strategy and not one that I or the UKBA would support.
A More Effective Approach to Acquisitions
So what should you do?
The alternative is straightforward and far more effective. Before progressing too far with any acquisition:
A Practical Acquisition Checklist
- Test what you can realistically borrow
- Speak to the funding market early
- Map out funding options before agreeing terms
- Assess whether the deal is genuinely viable.
Negotiating From Strength
With early clarity around funding, you can negotiate from a position of strength and direct your efforts towards opportunities that can be completed successfully.
Next Steps
If you would like an introduction to Rich or need support with acquisition planning, get in touch for a confidential discussion.