The Successful Business Acquisition Process – Step-#13-Financing the acquisition and step-#14-Your action plan

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Financing the acquisition

Financing the acquisition requires thorough and careful planning.  You need to consider the different sources of funding accessible to you.  The amount required for purchasing the company may dictate the types of sources that you seek out.  Some combination of debt and equity is likely. Be wary of overextending yourself with too much debt. On the other hand, be careful to protect your immediate family by not taking too great a risk with your personal assets.  It should not be necessary to put your entire life’s savings up for collateral.  If the deal makes sound business sense,  if a bank or other lending institution starts making unreasonable demands, check out another bank, review your business plan, or try some other approach.  Lending institutions vary from the unscrupulous to the impeccably correct.  You need to be especially cautious with any lender that is likely to take your company away from you if you fall behind on a few payments.  Check out your sources, both equity and debt, as thoroughly as you check out the seller.  Are you dealing with honest individuals?  Have you reviewed the fine print for hidden commitments that might jeopardize your ownership?  The earlier you begin to develop your financing plan, the more likely you will be ready to close, when the purchase agreement is finally negotiated and signed.

Your action plan

You can easily get so caught up in the acquisition process itself that you delay proper planning of the takeover until after closing takes place. This would be a big mistake.  Successfully  executed acquisitions require months of planning prior to closing, to assure a smooth transition.  Much of the preliminary work overlaps with a properly done formal due diligence–extensive evaluation of the company and identification of potential problems.  The remaining work, some of which may be obvious and some of which might require more problem-solving creativity, involves identifying the necessary changes and improvements that should take place and an assignment of due dates, budgets and people responsible for carrying out these changes.  A simple format is to create a short one-page action plan for each topic, identifying the issue, the action required, who is responsible, and when it will occur, along with a budget and expected results.

The acquisition action plan may be the single most important thing you can do to assure the success of your new company.  It is viewed as an extremely critical component of the successful acquisitions.  The chief (principal) operating person must be involved in the process from the start.

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