Why you should be talking about acquisitions
All accountants should be talking to both clients and banking contacts about acquisitions, according to Simon Blake corporate finance partner at Price Bailey LLP and UK200Group member.
Posted by Rachael_Power PM
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All accountants should be talking to both clients and banking contacts about acquisitions, according to Price Bailey corporate finance partner Simon Blake.
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Speaking at the UK200 Group annual conference in Cardiff last week, Blake said that clients in stronger positions than five years ago, coupled with banks' renewed eagerness to lend, has created good conditions for exploratory chats with both about acquisitions.
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Even if a client hasn't been considering this avenue, it's a good way to get them thinking about growth.
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"Clients are more optimistic, more willing to invest now. Funding is never easy, but getting easier. There has been more interest from the banks, which are getting into a more normal phase of lending."
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Blake quoted both the Business Growth Fund and Santander's 'breakthrough' offering as positive - i.e. their keenness to see growth based lending.
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"Clients always want to speak about growing their business much more so than the historical, compliance side of things. Therefore acquisitions are a great subject for conversation.
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"Even if the client isn’t thinking about acquisitions, there comes a point in a business’ life when a change will come up - even to make a small one like acquiring another team. It will also help the client think about the bigger picture of growth."
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On the banking side, Blake said his contacts encountered the same issues accountants do when talking about business development. In recent times, he has seen banks starting to prioritise lending over taking deposits. His advice included asking bankers to recommend your services relating to acquisition advice and strategy to their customers.
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"This is more positive than just talking about banking costs and likely interest rate change increases. When customers talk about future plans, this results in lending," he said.
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Accountants will benefit from acquisitions in a number of ways. They can advise clients on the transaction itself, and provide tax advice on the structure along with a raft of services such as valuation and business planning.
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If do manage to get the discussion going and your client decides on the acquisition route, Blake was ready to advise on the next steps:
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1. First, define the acquisition strategy. There are lots of elements to an acquisition plan. Spend time with your client to figure out what they want.
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2. Help them research potential targets, and advise on making their offer.
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3. Then comes negotiations, due diligence, managing the transaction to completion, and then formulating an integration plan for the expanded entity.
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Just guiding the client through the process will be really valuable to them, as whilst it may be something you as an advisor have seen multiple times before, it is something they will see often only see in a lifetime.
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Before the acquisition search begins, getting clear objectives are vital. This includes making sure the acquisition is affordable, is it going to fit culturally with the client's firm and that the management has the capacity to cope with the impact of an acquisition.
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Blake said his team builds on a 'first filter' that helps them assess possible targets. They can then use this filter to decide whether an opportunity warrants a more detailed investigation.
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Completing a deal is only the end of the beginning, warned Blake, which is why defining a strategy that all parties understand is so important. "Don't just talk with the client on getting it done, talk about how to make it successful after, too," he said.
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Common things to watch out for, that can easily go wrong, include:
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· Not being clear
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· Having no parameters put in place
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· Being reactive
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· Getting caught up in the emotion of the deal
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· Overpaying
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· Underfunding
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· Shortcutting on the deal
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· Distraction of key managers can have a massive impact in the short term
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· Owner reliance on key managers, customer or suppliers
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· Managing change
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· Reliance on vendor owner/managers post sale.
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For small and medium size businesses, the biggest issue surrounding acquisitions is that the owner of the other business may need to stay on for a handover period. Many owner-managers have never had a boss before and it can be a huge cultural shift for them.
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But in general, with interest rates staying low and banks keen to lend, raising the prospect of potential acquisitions is a very positive message for clients.
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Established in 1986, UK200Group is the leading mutual professional association of independent quality assured chartered accountancy firms and lawyer firms, with over 150 offices throughout the UK as well as 50 International Associate member firms around the globe. UK200Group provide services and products that are designed to enhance the business performance of its members. Telephone 01252 401050, email admin@uk200group.co.uk or visit www.uk200group.co.uk
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Summary: All accountants should be talking to both clients and banking contacts about acquisitions, according to Simon Blake corporate finance partner at Price Bailey LLP and UK200Group member. |
Publication Name |
AccountingWeb |
Sector |
All |
Magazine Link |
http://www.accountingweb.co.uk/ |
Attachment |
AccountingWeb_18 Nov14 |
Date |
18 Nov 2014 |
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