The Tidewater Group focus is the food industry and in particular food processors, distributors and importers in the middle market of the food industry. If we are representing a company that is interested in an acquisition as part of their strategic plan, we counsel them to focus on a particular business segment and the type of firm that provides the best fit with their company. We also assist them in the development of acquisition criteria prior to the start of the search. Here are some tips for a buyer to consider prior to the acquisition search.
- Study before you leap: We suggest that the client studies the business segment before asking us to proceed with the search. We will contribute our knowledge and the information in our databases to assist the client in the process. Obviously, if the client is looking at an acquisition within their own business segment, less study is necessary. However, competitive information should be reviewed and organized in a way to assist in formulating a list of the top targets.
- If the targeted business segment is different than the client’s, more study is required. Make a list of everything that is wrong with the segment and how you expect to impact the market. It is also helpful to make a list of the items that you would do differently, to help you succeed as quickly as possible. When the client is comfortable, we will assist them in compiling a list of the top 10 target companies.
- Set a walking away price: When a company that has been contacted indicates an interest in discussing a possible merger, before any discussions begin, set a walking away price. We recommend setting a reasonable entry price and a top price so that a clients’ limits are established prior to negotiations.
- Ask the right questions: In discussions and negotiations, be sure to ask the questions that need to be answered. If the target indicates that they are uncomfortable answering the question at this point in the negotiations, respect their wishes. However, we will indicate that the question must be answered before any final offer is made. Sometimes the exchange of the buyer’s information for the same information from the seller makes the process work. The seller is then comfortable that they are not at a disadvantage if the transaction does not go through.
- When the target is in a turnaround situation: When this occurs, the most important issue is understanding the business before any significant decisions are made. Keep all employees until you understand each employee’s capabilities. Make sure you learn all necessary operating and sales information before any terminations are made. This is also an opportunity to evaluate your new employees in comparison with your existing employees. Just because you made the acquisition, doesn’t make your long term employees better or the new ones less talented. Do not fall into the “we won – you lost” trap and lose and terminate good future employees. Some Fortune 550 size companies insist that no changes be made in an acquired company for a minimum of six months.
Download this article as a PDF: POV_21 The Buying Process