Planning the right transaction

Thinking about acquiring or selling a business can be a daunting prospect for many business leaders. Whether you’re a business owner with years of experience, or the head of a fast growth company with ambitious future plans, it’s important to think carefully about whether an acquisition or sale is the right next step and why.

How does the market feel?

Although Brexit and the general election created a hiatus in mergers and acquisitions (M&A) activity, things have started to bounce back. And now that there is some clarity over the UK’s departure from the EU, there is hope it will give businesses more confidence to move forward with M&A deals. According to Mike Hughes, Head of Advisory at the Northamptonshire office of financial and business advisers Grant Thornton UK LLP, the local market is buoyant and ready for business. “We have been involved in closing five local M&A transactions in the last four months, so the market in the area is highly active with plenty of opportunities,” he explains. “Pricing in the market remains relatively high and has been so for a number of years, so it’s important to make sure early on that any transaction makes strategic sense.”

Making the decision to acquire

The right acquisition can be transformational for a business, bringing access to new skills, products and markets. That said, it’s important to think strategically about what the objective is in an acquisition, rather than just reacting to an available opportunity.

Mark Clement leads Grant Thornton’s Transaction Advisory Services team in the local area. He expands: “Make sure you have clear criteria on what is of interest and what isn’t. Also think about whether the target business shares your values and culture. Often the best targets are those that you already know or have had some trading relationship with.”

Mark also suggests being clear on funding at the start of an acquisition. Think about how much you are prepared to invest and where the funds will come from. Remember that the full cost of a deal also includes working capital and future investment required. Another important step is preparing a clear and costed business plan. Once that is in place, think carefully about whether an acquisition is the best use of funds – what else could you spend the cash on instead? “One of the most important things you can do is to spend time on a post-deal integration plan,” Mike adds. “It’s not just about the deal itself – it’s about knowing what you’re going to do with a business after you’ve bought it. It’s vital that these plans are in place within the first three or four months, otherwise you risk losing value.” Mike also highlights the benefits of thinking about deal structure to secure a transaction. For example, could an earn-out, deferred consideration or offering a retained stake to the vendor improve the overall balance between risk and reward?

Closing the deal

Once you’ve decided on an acquisition target, the due diligence process is vital to ensuring there are no post-deal surprises. “Robust due diligence will scrutinise the target business’s financial status and history to ensure you are paying the right price and that you are getting what you’re expecting,” Mark explains. “This will cover everything from the target’s profit and loss account and balance sheet, to forecasts, organisational structure and all forms of tax.” Any ‘red flag’ diligence issues should be communicated quickly so both parties can iron out such matters and agree a way forward, which may involve a change in pricing or deal structure. If and when due diligence identifies areas which need legal protection, these can be reflected in the Sale & Purchase Agreement through appropriate warranties and indemnities. While selling or acquiring a business can lead to a host of opportunities for both parties, it is a significant piece of work which is often months or years in the planning. Mike concludes: “If you’re contemplating a sale or an acquisition or are thinking strategically about the way forward for your business, it’s important to seek high quality advice right at the start of proceedings. Early insight is invaluable in making informed decisions and can make a big difference when it comes to the success of a transaction.” Grant Thornton has just been ranked as the most active financial advisor in the UK and has unrivalled expertise in deals, advisory and due diligence.


For more information, contact Mike Hughes (mike.hughes@uk.gt.com, 01908 359581) or Mark Clement (mark.clement@uk.gt.com,

01908 359583).

Mike Hughes - Grant Thornton
Mike Hughes - Grant Thornton
Mark Clement  Grant Thornton
Mark Clement Grant Thornton