A Legal Guide to Acquiring

Developing a company to sale is a difficult task. Discover how to plan for and protect your company during a merger or acquisition.

What you’ll discover:

How do you create an acquisition-ready company?
When is the best moment to sell your company?
How should I advertise my company for acquisition?
What can company owners do to prepare for a takeover?
What if the purchase fails?

Many entrepreneurs establish a firm with the intention of selling it rather than running it. Businesses often acquire or purchase other enterprises. Getting a firm ready for an acquisition is difficult, but it can be very rewarding. Various processes may be necessary before acquiring a firm. Moreover, positioning your company in a market or sector to be bought may need extensive strategic effort. Nevertheless, if done correctly, it might be the chance you’ve been looking for to shift your position in the organization and reward your investors.

How do you create an acquisition-ready company?

Creating a firm that other corporations would want to buy requires research, strategic planning, and entering the market with a brilliant concept that generates demand and money. Putting up legal protections for your firm is an essential aspect of ensuring that your business concept is not simply duplicated by another. They may include any or all of the following, as well as others:

Secrets of the trade.
Copyrights.
Trademarks.
Patents.
Client lists are kept private.
All rights reserved.

A company owner may prepare for an acquisition by taking key legal and financial actions such as:

Creating an LLC or a company.
Contracts are being reviewed for renewal and assignment.
Examine their portfolio of intellectual property.
Performing a business evaluation.

A company appraisal might assist you in determining a value. A specialist, such as a CPA, may estimate the value of your company to help you negotiate. To safeguard your interests, a transition team can guarantee a seamless move. A team of an attorney, a CPA, and a financial counselor may undertake due diligence and avoid tax or legal fines.

An owner must know their firm deep and out in order to be acquisition-ready. A Business Fact Sheet may assist in the organization of information and serve as a reference for other legal papers or correspondence. It is a good idea to be prepared to sell your firm even before a buyer approaches. Taking stock of the company might lead to enhancements that can add value to a possible buyer.

When is the best moment to sell your company?

It all depends. If your investors are pressuring you to sell, an acquisition might expedite the process and satisfy your investors. A few frequent scenarios that may prompt a company owner to carefully consider an acquisition offer are as follows:

If your firm is rapidly developing, you may lack the funds to stay up and expand into new areas or fulfill demand. Being bought may help the company to expand to satisfy that need.
The market may be oversaturated when there is more competition in your location for your company than you think, or when you initially began. A competitor’s purchase may help both firms by bringing together resources and more.

There are additional less formal variables to consider. Business owners often become tired of operating their companies or seek new challenges. For those firm owners, there are two options: a complete or partial departure via liquidation or recapitalization of the business. Although the latter allows for a complete departure from the firm, it may not provide the expected profit. On the other side, recapitalization is a frequent purchase structure that allows the firm owner to stay partially active or on the perimeter.

A Limited Partnership Agreement, a Partnership Agreement, or a Joint Venture Agreement are the three frameworks that might define your post-acquisition function. Moreover, since you may turn your stock ownership into cash, selling your firm may free up liquidity.

Instead, there are several reasons why you should not sell your firm. As an example:

Owners may be required to manage crucial customer connections or to conduct the task.
The company may not survive the split.
A company’s revenue may fluctuate.

You want your company purchase to be as effective as possible, therefore understanding these characteristics in your circumstance is crucial.

How should I advertise my company for acquisition?

A public relations strategy may help you tell your narrative, advertise your product or service, and position your company to drive demand. A company’s board of directors may often aid with the campaign.

Your target demographic, as with every transaction, defines your marketing efforts to contact potential purchasers. Selling a firm may need industry networking or the formation of a team to assist. A broker or team of client acquisition professionals might use targeted marketing to attract new buyers.

What can company owners do to prepare for a takeover?

After the general framework has been agreed upon, the details of the transaction may be detailed in a Merger Agreement, a Business Selling Agreement, and a Deal Letter. Depending on the conditions, shareholders, stakeholders, workers, contractors, and suppliers may want updates during and after the purchase.

Generally, company owners create a transition plan based on the agreement’s dates and structure. A transition plan may be useful in assisting stakeholders on both sides in preparing for integration. It may also aid in the formation and maintenance of critical commercial ties, preventing customers from defecting.

A company’s physical and non-physical assets, in addition to its employees, must be prepared for the transfer. This includes equipment, computers, furnishings, intellectual property, and other items. In terms of intellectual property, the acquiring company may need trademarks, copyrights, and patents to be given to it via different agreements.

What if the purchase fails?

Purchases typically fail. 70% to 90% of mergers and acquisitions fail. This might be related to one or more of the following factors:

Incorrect values.
Inadequate due diligence.
Buyer made an overpayment.
Synergies are overestimated.
Inadequate operational and cultural integration.
Important personnel are departing or getting laid off.
Inadequate grasp of how the firm achieves success.

It is not all doom and gloom if an acquisition fails. If the problem cannot be resolved, there may be alternative choices to consider. During preliminary due diligence, your team may develop a backup plan so that if the purchase falls through, your company is ready to stand on its own.