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Thinking of purchasing a new company to add to your portfolio? Pt 1l

By Russell Pope
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Steps 1-3 when acquiring a new company

If you’re new to the company acquisition process, it’s difficult to know where to start. This is the first of a series of posts that will help you.

  1. What do you want to achieve from buying this business

You should always have solid reasons for acquiring a new business. The purchase must make sense in terms of your growth strategy, and it will need to support your overall vision for your portfolio moving forward.

Is it the people, the culture, or the market position?

Or is it simply the prospect of taking the next step on your corporate journey by adding a new, and potentially profitable, string to your bow?

The most important question is: will buying this firm help you take the next step to achieve your short- and long-term goals?

If there isn’t a strong business case, it’s best to leave the business be.

  1. Make sure you know exactly what you’re purchasing

It’s easy to get caught up in the excitement of exploring pastures new. Throughout the acquisition process, you need to study exactly what you will be investing in. This is especially important if the company will take you into new territory and/or different markets. Explore the company’s product or service offerings in great detail; get to know the management team well, and the systems and protocols they use to keep the business in check, and gain an understanding of the competition the business faces, and any challenges or limitations the company faces in its industry.

As an aside, wherever possible, you want to look for synergies with your existing business, either in terms of the expertise offered by its teams, its physical location, or its client base. You should always have at least one thing in common with the venture (and preferably more).

  1. Carry out your due diligence

With the help of your financial professional and business experts like @UKBA, you’ll want to look at every aspect of the business to ensure you have a handle on its debts and liabilities before you commit to the purchase.

It’s also a good idea to consider the corporate governance principles that have been guiding the business to date. Get proof that regular board meetings have taken place; look into how many non-executive directors have been appointed, and scrutinise the company’s #accounts and records to make sure everything is in order.

All these factors are important to the smooth running of a financially healthy company that is prepared for further growth.

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Courtesy of Russel Pope

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