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Thinking Growth and Acquisitions or Business Sale

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Thinking Growth and Acquisitions or Business Sale

By , July 25, 2019
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Growth through acquisition can be one of the most challenging and risky decisions taken by a business. Without expert advice in key areas of tax, accounting, legal, HR, and business valuation, a great concept can turn into a significant challenge. A business sale can similarly turn challenging and result in a lower price or enduring post-transaction risks without suitable professional engagement.

Due diligence is a broad-based analytical process which seeks to elicit adequate disclosure and dimensioning of risk in a transaction for both buyers and sellers. While sometimes considered expensive, it’s usually a sound investment in peace of mind and ensuring a clean forward landscape is available to buyers. It is not full value insurance but it does give confidence in key areas often overlooked by engaged owners deeply entrenched in their day to day operation.

We have compiled a sample of areas for consideration and due diligence for business owners embarking on growth plans:

Operations

  • Supplier agreements – continuity or conflict, term
  • Systems – integration, compatibility, data exchange
  • Key people identified
  • Key customer relationship review, agreements, terms

Finance

  • Employee provisions accounted for
  • Liquidity – what is required, back up sources
  • Balance Sheet adequately provisioned – debtors, inventory
    Finance agreements – change of ownership or change of control implications

Compliance

  • Tax, accounting, employee obligations WorkCover, superannuation
  • Employment contracts – Fair work compliant and legally enforceable
  • Record keeping – Board minutes, budgets, key decision process
  • Other legal agreements core to the business

Risk

  • Insurance cover – adequate in amount and range of cover
  • Acquisition structure – tax leakage, CGT rollover relief?
  • Property leases – key terms review, exit rights, tenure

While the above points are made as guidance, the specific scope is transaction dependent. The materiality of findings together with risk appetite and disclosure will generally define how these findings are managed, documented and impact on valuation.

For more detailed information or a confidential conversation on establishing a process for your business sale or potential acquisition, get in touch today.

Darren McCoubrie

Accredited Advisor | Succession Plus

Darren has extensive experience with client relationship management and structuring of risk-based financial solutions to the infrastructure, industrial, manufacturing, construction and engineering services sectors. His capital structuring skills extend beyond quantitative analysis into qualitative assessments and provide a differentiated aspect of risk and funding solutions. Darren has broad product experience across working capital, transactional, trade, financial markets hedging, asset finance and term bank and bond market funding.