Two tips for getting a deal over the line…
In the last two years I have acquired three businesses. I have also got another deal that I hope to complete on in the New Year and have had two deals collapse during the share purchase agreement negotiation/deal finalisation process. Whilst these two deals were frustrating as I put a lot of time into trying to get the deals over the line and wasted accountancy and legal fees, I learned a lot from these mistakes that I can take forward and implement these learnings on future deals.
Having been through the deal process several times and completed three deals, I am in a nice position now where I can look to add to my portfolio but be a bit more selective over the opportunities that I pursue and spot the signs that might make a deal difficult to complete and stressful. So here are the two key lessons to avoid stress and help get deals over the line.
1)?????If it takes a long time to agree the heads of terms (HoT), it will be a nightmare once you get to agreeing the share purchase agreement (SPA). In both deals that collapsed, it took a long time to agree HoT, and then for the sellers to produce the information required to do due diligence. Any rapport that we had build initially and motivation for the seller to get the deal done was lost during this time, so it became impossible to agree the SPA.
As part of the HoT agreement process, I now outline the sale process and timeline to sellers to ensure we all keep the deal moving. I also ensure that any contentious items are dealt with agreed at this early stage as I would rather deal breakers are identified before fees are incurred.
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2)?????Manage 3rd parties and their solicitors. In two of the deals that I have completed, there have been 3rd parties involved and their solicitors. In one deal, this was the property acquirer and their solicitor and in the other deal we had four parties involved; myself as the buyer, the seller, the finance company and the landlord as a new lease needed to be agreed. It is difficult to get two parties and two sets of solicitors to agree contracts and agree a completion, never mind four!
The main lesson from this is to share timelines and deadlines with all the solicitors. There will always be some document that you have never heard of that a solicitor will require producing at the last minute or one of the solicitors will go on holiday on the week of completion, so make sure all parties clarify what they need to be able to complete on the target date so you can get organised. I can confirm from experience that running around an industrial estate in Manchester trying to locate the landlord and a witness to sign some spurious document at the last minute before we were due to complete wasn’t fun!
About the Author
Having previously worked as a Charted Accountant in Corporate Finance before running and then selling his family business, Daniel is now building a portfolio of businesses through acquisition. Typical target companies are in the manufacturing and wholesale sectors with turnovers of between ￡1 and ￡5m.
If you want to discuss selling your business, or know someone who does, you can contact Daniel via LinkedIn.
Founder | Group CEO | SME M&A Expert | ex C-Level Global Executive | Finance | Strategy | Commercial | People | Building and scaling the UKs favourite platform for M&E / FM companies to be 'Stronger Together'
1 年Agree with your points Daniel. I have been fortunate in completing 4 deals from 4 HoTs signed but still resonate with the points made. I think it makes absolute sense to upfront as many of the potentially contentious points and include as many of these in the HoTs as possible. being clear on expected timelines and having regular check ins to keep all parties moving is also very beneficial.
Entrepreneur - CEO Of ado
3 年Ado Startup LLC Wishing you a Happy New Year 2022 Merry Christmas With more progress and prosperity and achieving goals successfully https://ado-eg.com/en/
? Helping business owners prepare for a successful exit ? Connecting investors with opportunities ? Non Executive Director ? Private Investor ? Author of "Pathway to Exit" ?
3 年Adding a timeline to the heads is a great idea.
Collaborating in Property | Property & Commercial Consultancy | Property Development & Investment
3 年Great tips Daniel ??
Managing Director at Fairgrieve Compression Moulding
3 年Very interesting read Daniel. Experience is everything and the more acquisitions you make the more you learn including those pit falls which can be time consuming and expensive.