Thoughts from the UKIF Membership

7 December 2012 – 4:24 pm

The latest from the technology transfer and science park member’s organisation, UKIF (UK Innovation Forum).

The article below forms part of a series of articles on business growth and exit.

Xavier Adam – The Deal, getting started

This week Xavier writes:

Deals come in many flavours from different acquirers and with different motives.

Selling out should enhance the founders and both companies, the acquirer and the acquired. Make sure the deal process is not a distraction and someone is mandated internally to handle the deal ‘project’. It will be all encompassing, from running the process, to finding copies of contracts and legal documents, to liaising with the accountants and lawyers. As the deal takes shape, you will get much busier. It cannot be stressed enough how many elements there are to most deals and it will usually take twice as long to agree and complete as initially imagined.

Running the deal process alongside a regular day job is nigh on impossible, if of course you want to do execute correctly, extract the maximum value for the business and ensure employees and clients interests are best looked after.

Experienced buyers are wise to the busyness and the stress the company will be under, and a known tactic of some less scrupulous acquirers is to attempt to erode some of the value of the business pre-deal signing. Thus achieving a new lower price and putting the existing directors on the back foot.

This untoward tactic may take many forms from pushing key clients to leave on the basis they can be re-engaged post transaction, to offering favoured employees direct roles within the acquirer’s business, so there is no need to pay a premium for these people in the deal.

In at least one case witnessed, a plc attempted to steal the client’s business mid-deal talks. Keep your wits about you, this is business, and you have worked hard to get to this stage of sales negotiation.

It is imperative someone internally is working full-time on the deal to ensure all interests are best represented.

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