Don’t forget ‘B’ word if you expand

QAWe’ve grown organically until now but believe that to expand further we should diversify into related areas through an acquisition. How should we go about it? Whilst trying to avoid the dreaded ‘B’ word, with the current economic uncertainty, I would stand back and take this opportunity to plan the future of your business. We are currently seeing many clients experiencing record sales in advance of Brexit day, but with the expectation that sales will decline after March 29.

Timing is crucial. The seller will want to sell when profits are high. You, however, will want to ensure you are acquiring the business at a fair value. We recommend a due diligence exercise to ensure the price sought is based on sustainable profits. In short, be prepared for a transaction to take between six and 24 months.

Our normal approach is to help business owners identify where they are now and where they want to get to. It may be that an acquisition is needed to get the business to the next level in order to structure it for sale or the shareholders’ exit.

When looking to bolt on a related business to diversify the business and potentially create an alternative income stream, we work with the management team to consider which related business sectors might provide the optimum opportunities and returns.

We would also help determine the appropriate size of acquisition and how this can be funded. What type of business will achieve greatest synergies? Should the purchase be shares or assets? The difference will have a big impact on structure, tax efficiencies and price. A seller will almost always want to sell shares, whereas the buyer is, most likely, wanting to acquire the assets.

Brexit, in whatever form, will offer many opportunities but potentially a different trading environment. Now is the time to start planning to enable your business to take advantage of future opportunities.