Tag Archives: due diligence

18 Steps–Acquiring the Right Business

drjohn11aDr. John Psarouthakis, Executive Editor of www.BusinessThinker.com, and Founder and former CEO, JP Industries, Inc., a Fortune 500 industrial corporation

One enters into a rather specific process when one decides to acquire a business and particularly the “right” business. You must manage and control the process if the result is to have a good chance to be the desired one. The acquisitions process involves several distinct steps and sub-steps that need to be attended to with extreme care and dealt with expertly and skillfully.

These steps are the following:

1.  Know what you want to acquire.

2.  Set up criteria to guide you on what you want to buy.

3.  Set up a plan on how you will proceed.

4.  Identify/build a team that will work, do, and manage the process with you.

5.  Develop a network of credible sources for acquisition candidates.

6.  Screen carefully and thoroughly the candidates using the criteria set.

7.  Conduct an effective preliminary evaluation/due diligence before you spend a great deal of time and money.

8.  Negotiations really begin at the first meeting with the owner or his/her representatives. Preliminary agreements take place then and should be included in a letter of intent.

9.  Involve your attorney early in the process and also with the letter of intent.

10.   Conduct a thorough evaluation/due diligence. Look for surprises, but do not panic.

11.  Develop a detailed action plan and complete it before you close the deal.

12.  Review the value and price of the business with your colleagues.

13.  Negotiate the purchase agreement with the full participation of your attorney.

14.  Close the deal.

15.  Have an all employee meeting in the acquired company very soon after closing, immediately if possible.

16. Present / discuss plan with the local management first.

17,   Begin implementation of the action plan immediately.

18.  Most important, meet as many people of the company as possible during the acquisition process. Do not wait to meet them after you close the deal.

Reference Book: “How to Acquire the Right Business”, Xlibris Corporation, 2009

To buy this book go to xlibris.com  or  amazon.com or e-mail a request to drjohnps@hotmail.com

 

 

 

 

 

LETTER of INTENT and FORMAL DUE DILIGENCE for ACQUISITIONS

Dr. John Psarouthakis, Founder and former CEO, JPIndusries,Inc., a Fortune 500 industrial corporation. Publisher of www.BusinessThinker.com

This article covers the letter of intent, which should be negotiated and signed prior to the start of formal due diligence and the formal due diligence process itself.

The most extensive and expensive investigation of a company lead takes place during the formal due diligence.  Formal due diligence can be viewed as the fourth filter through which company leads pass.  Because of its expense, you should probably plan to complete formal due diligence on a company you are fairly certain to buy.  Sometimes the process of negotiating the letter of intent itself weeds out some candidates that looked good after preliminary due diligence. Or you may uncover information during the formal due diligence that you were not aware of during the preliminary due diligence phase.  It is likely that during the 18 month to two year period that you scrutinize company leads, if about two dozen leads get subjected to a thorough preliminary due diligence, only four or five will actually follow through to formal due diligence. Some will drop out during the preliminary due diligence phase itself. Other company leads might drop out because buyer and seller are unable to agree on terms in the letter of intent.

For the complete article go to e-reports at:

http://www.jpmcenter.com/#!letter-of-intent–formal-due-dilligence/c1s36                                              

Reference: “How to Acquire the Right Business”

John Psarouthakis & Lorraine Uhlaner

Published by Xlibris, 2009

PRELIMINARY DUE DILIGENCE (This is the 9th article in the series on M&A)

An extremely important and usually the most critical part of the acquisition process is a well-conducted due diligence. This is not a stage where the financial condition only of the company is thoroughly checked out—far from it. It is a stage when the entire business relates to its operations, supplier relations, customer relations, employee relations, relations with the financial institutions it deals with, its strategy, businessdevelopment plans, and so on as we will see in this and the nex tarticle.

It is rather evident that this process can be a very expensive undertaking. Therefore, it is strongly recommended that the due diligence process is divided in to two stages: the preliminary stage and the formal stage. Basically your goal in preliminary due diligence, once you have obtained enough information to have an understanding that the company meets your criteria, is to determine early in the process whether or not there are any obvious skeletons in the closet—anything of significance hidden from you that could seriously jeopardize the value of the company, whether there is a drop in sales or unanticipated major expenses, any major lawsuits and the like.

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