Entrepreneurship through Acquisition (ETA) is the path to becoming an entrepreneur by buying and growing an established small business. For individuals with business skills and a desire to make a meaningful impact, this can be less risky than starting a new business around an unproven product or service.

ETA is typically pursued later in a person’s professional life after they gain operational experience and a more robust professional network. Over the past two decades, ETA has become a more well-trodden career path.

It’s a form of business that harnesses the power of synergy. It’s the pursuit of success that, instead of creating something out of nothing, creates something more and something new out of what’s already there.

It’s the difference between you struggling to get your idea off the ground, and you implementing strategies and executing your ideas profitably.

As entrepreneurs, we watch the stories of big buyouts and dream of being that person who built and then sold for astronomical figures. From a distance and after the fact, the experience looks exhilarating and brilliant. We all want a piece of it.

• What is Acquisition Entrepreneurship?
• Acquisition Entrepreneurship Course
• Acquisition Entrepreneurship Books
• Acquisition Entrepreneurship Examples
• Acquisition Entrepreneurship Programs
• What is an Acquisition
• Business Acquisition
• Acquisition Business Process
• Company Acquisition
• Data Acquisition
• Business Acquisition Course
• Acquisition Business Loans
• Acquisition Business Plan
• Business Acquisition Lawyer
• Business Acquisition Financing
• Business Acquisition Loan no Money Down
• Are Business Acquisition Costs Tax Deductible?
• Business Acquisition Specialist
• Acquisition Business Strategy
• Funding a Business Acquisition
• Acquisition Entry Mode
• How to Acquire Entrepreneurship Skills
• Acquisition Advantages and Disadvantages
• Acquisition of Turnover
• Acquisition Agency
• Acquire Business Sales
• Acquisition Business Advisory Services
• Acquisition Business Analysis
• Business Acquisition Accounting
• Business Acquisition Broker
• Business Acquisition Due Diligence Checklist
• Business Acquisition Grants
• Business Acquisition Jobs
• Business Acquisition Loan Requirements
• Acquisition Business Strategies
• Business Acquisition Manager Salary
• Business Acquisition Questions
• Business Acquisition Valuation Methods
• Business Acquisition Finance

What is Acquisition Entrepreneurship?

Acquisition entrepreneurship sits at the intersection of entrepreneurship and investing. With the right balance of those two worlds, it’s a field brimming with opportunity.

Simply put, acquisition entrepreneurs apply their business-building smarts not to a fresh startup, but to buying and growing existing businesses.

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In the quick-footed world of startups, it might seem counterintuitive to imagine business acquisitions anywhere near the same entrepreneurial space. After all, many acquisitions take four to six months to complete — a tough time frame for driven entrepreneurs to endure.

Further, 90% of those who venture down the buyer’s path never end up closing the deal. The reason for this hesitancy — by most entrepreneurs’ standards — has less to do with the field itself than with the collision of worlds it represents.

Acquisition Entrepreneurship Course

Entrepreneurship Through Acquisition

Taught by Mark Agnew and Brian O’Connor, Entrepreneurship Through Acquisition (“ETA”) will give students frameworks and real world solutions to use if they decide to pursue an acquisition of and lead a company. The class will walk through the life cycle of a typical path toward finding and running a business including information on fund formation, raising capital, searching for a company, buying a business, leading that business and then ultimately selling it.

Approximately half of the course will go through critical points leading up to buying a business, while the other half will address some of the key issues executives face while running a company (identifying metrics, communicating with a team, interviewing, handling HR issues, etc).

Although the main focus will be on buying and running a business, the class is designed to be applicable to many other career paths including private equity, venture capital and entrepreneurship.

The class will utilize cases, assignments and or/ readings in each lecture along with speakers who will give real life techniques that they use to excel in the particular area that the class is structured around.

We hope everyone comes fully prepared for lively discussion and debate. Attendance is mandatory and will be factored into the class participation grade. There will be cold calling to encourage a variety of perspectives and please be prepared for role playing, at any point in the class, as Professors Agnew and O’Connor strongly believe in trying to make some of the concepts as applicable as possible.

Grading here will be based primarily on the quality of the ideas with which you bring to class. Most class meetings will have guest speakers as “real life” entrepreneurs and investors are critical to the understanding of class material and frameworks. Active involvement and engagement with the guest speakers will be factored into the class participation grade.

This class is only available to Booth students.

Acquisition Entrepreneurship Books

The Complete Guide to Buying a Business
By Fred Steingold J.D.

Written by a Michigan Attorney who has extensive experience representing small businesses in several capacities, this book is a comprehensive resource that provides a thorough overview of the buying process with concrete examples. If you are looking to acquire a huge corporation, this is probably not the book for you.

However, if you are seeking to purchase a small business, this book serves as a great guide to subjects such as financing, negotiating, comparisons of entities, and standard forms. It will also inform you of when you likely need to enlist the help of a professional broker or lawyer.   

Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game
By Walker Deibel

Buying and growing an existing business is considered a smarter path to success than dealing with the pitfalls of start-up companies. This book outlines the ins and outs of becoming a successful acquisition entrepreneur, written by an investor who has co-founded three startups and acquired seven companies.

It delves into beneficial topics such as spending less time raising capital, using ownership to achieve financial independence, discovering the best opportunities, and finding quality business brokers.

Buying a Business That Makes You Rich

By John Martinka

The author has of this book has more than 20 years of experience as a business buyer advocate, helping executives to abandon the corporate world to enjoy the freedoms of business ownership. In this book you will read about being smart when purchasing a business, including ways to avoiding overpaying and knowing the right questions to ask throughout the process. It offers smart methodologies and practical insights without overwhelming the reader with what can be a complex undertaking.

How to Buy a Business without Being Had: Successfully Negotiating the Purchase of a Small BusinessBy Jack Gibson

Case studies, practical advice, and simple terminology are all part of what make this book a great read for anyone looking to purchase a business. The author offers more than 30 years of experience helping entrepreneurs learn how to talk to sellers and brokers, with a focus on avoiding missteps.

The book also includes commentary from business owners who wished they had known how to avoid common mistakes, as well as a useful study and discussion guide.

HBR Guide to Buying a Small Business: Think Big, Buy Small, Own Your Own Company (HBR Guide Series)
By Richard S. Ruback and Royce Yudkoff

This book is written from the perspective of professors at Harvard Business School as a guide to entrepreneurship for small business owners. The text was previously only available to Harvard students through the authors’ courses. It is a concise yet thorough resource that will arm you with important topics you should discuss with sellers, brokers and attorneys along the way when buying a small business.  

Acquisition Entrepreneurship Examples

An acquisition is when a company buys more than 50% ownership in its target. With gaining more than 50% in the target company, the acquisition company acquires the right to make decisions without the consent of the stakeholders of the target company. The acquiring company gets this ownership by purchasing the stock or the assets. The target company expects a premium paid over and above the current rate.

Below we have provided you with the top 4 examples of acquisitions.

Example #1 – Amazon acquires Whole Foods Market

Amazon acquired Whole Foods Market for a total of $13.7 billion deal. It made the e-commerce giant move into many physical stores. Also, it will make Amazon continue its long goal of selling more groceries.

Amazon paid $42 per share in an all-cash deal for Whole Foods Market, including debt. The premium paid was ~27% of Whole Foods Market’s closing price on Thursday, June 15.

Amazon paid $9 billion of the total $13.7 billion deal acquisition price. It means that Amazon paid nearly 70% for future growth prospects and only the remaining 30% based on the current business of Whole Foods Market. After the acquisition, the goodwill balance of Amazon was at $13.4 billion at the end of the fiscal year 2017, which was the largest in history and had more than 10% of the total assets.

Example # 2 – Sun Pharmaceutical Industries Ltd. acquires Ranbaxy Laboratories Ltd.

This pharmaceutical deal is an example of a share swap deal. According to the deal, Ranbaxy Laboratories Ltd.’s shareholders would receive four Sun Pharmaceutical Industries Ltd. shares every five. It leads to a 16.4% dilution in the equity of Sun Pharmaceutical Industries Ltd. The deal size was $3.2 billion and was an all-share deal.

The consolidated turnover of Sun Pharmaceutical Industries Ltd. was ₹11,326 crores. It acquired Ranbaxy Laboratories Ltd., a company with a turnover of ₹12,410 crores. Thus, Ranbaxy Laboratories Ltd. achieved a sales valuation of 2.2x last twelve months. The beauty of this deal is that a smaller company acquired a bigger company.

Ranbaxy Laboratories Ltd.’s share value was ₹457 per share; this represents an 18% premium to the thirty-day volume on the weighted average share price.

Reasons for acquisition – This was a strategic acquisition for Sun Pharmaceutical Industries Ltd. It would help them fill gaps in the U.S. and help them get better access to emerging markets, and gain a strong foothold in the domestic market. In addition, due to this acquisition, Sun Pharmaceutical Industries Ltd. also had the opportunity to gain the number one position from the current third position in the dermatology space.

Example # 3 – Microsoft and LinkedIn

Microsoft acquired LinkedIn for $196 per share in a $26 billion deal and fought with its competitor Salesforce.com, Inc. The shares of LinkedIn rose 64% after the announcement. It was an all-cash deal and included all of LinkedIn’s net cash. It represents a 50% premium to LinkedIn’s last closing price, which amounted to $9 billion. In addition, Microsoft bought LinkedIn at a lower price by 25% than its all-time high.

Microsoft financed this deal with the issuance of new indebtedness. As a result, the deal may dilute ~1% of the non-GAAP EPS.

This deal is mainly the 433 million LinkedIn subscribers and professional clouds. The core idea was primarily to boost data productivity.

Example # 4 – Disney and 21^st Century Fox

Disney acquired 21st Century Fox for $71.3 billion, a real shakeup for the entertainment business. This deal brought together two major giants of the entertainment world. Disney won this deal from its competitor Comcast, which took nine months to get approval. It is one of the biggest deals in recent times. However, this deal may lead to laying off more than 4,000 jobs.

Assets changing hands in the deal include:

• 20th Century Fox
• Fox Searchlight Pictures, Inc.
• Fox 2000 Pictures – Fox Family
• National Geographic Partners, LLC
• Fox Networks Group International
• Indian channels like – Star India
• Fox’s percentage interests in Hulu, Tata Sky, and Endemol Shine Group.

Acquisition Entrepreneurship Programs

This elite program is designed to provide support to second-year MBA students who are seeking to search for and acquire a business upon graduation. This can be accomplished via the search fund model, as an independent sponsor, through a family office, or otherwise.

Selected students will participate in regular meetings with the program director and other participants. Each participant will be paired with an alumni mentor with experience in search funds, private equity, or another relevant field. Additionally, selected students will receive up to $8,000 in financial support to launch a search fund or otherwise pursue an acquisition. Academic credit is not available for participation in this program.

Interested students are encouraged to enroll in the course ES 516 – “Entrepreneurship via Acquisitions” in the Fall A term of their second year. Students will be selected for the program early in the Fall B term and the program will run through graduation.

What is an Acquisition

An acquisition is when one company purchases most or all of another company’s shares to gain control of that company. Purchasing more than 50% of a target firm’s stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company’s other shareholders. 

Acquisitions, which are very common in business, may occur with the target company’s approval, or in spite of its disapproval. With approval, there is often a no-shop clause during the process.

We mostly hear about acquisitions of large well-known companies because these huge and significant deals tend to dominate the news. In reality, mergers and acquisitions (M&A) occur more regularly between small- to medium-size firms than between large companies.

Companies acquire other companies for various reasons. They may seek economies of scale, diversification, greater market share, increased synergy, cost reductions, or new niche offerings.

Business Acquisition

An acquisition is defined as a corporate transaction where one company purchases a portion or all of another company’s shares or assets. Acquisitions are typically made in order to take control of, and build on, the target company’s strengths and capture synergies. There are several types of business combinations: acquisitions (both companies survive), mergers (one company survives), and amalgamations (neither company survives).

The acquiring company buys the shares or the assets of the target company, which gives the acquiring company the power to make decisions concerning the acquired assets without needing the approval of shareholders from the target company.

Acquisition Business Process

Here is a step-by-step guide of how a startup acquires another company.

1. Make a Plan

Look at the reasons to buy a company:

• Finding new markets
• Industry roll-up strategy
• Getting advanced technology
• Market window strategy
• Product supplementation strategy
• Getting new personnel
• Synergy strategy
• Geographic growth strategy
• Increasing market share
• Diversification strategy
• Vertical integration strategy
• Increase supply chain pricing power
• Adjacent industry strategy
• Eliminate competition

Consider which of these resources you need. Find out why the business is worth buying. Develop an acquisition plan that gets the most out of the enterprise while spending the least. Focus on the aspect of the company that is most valuable to you and shape your offer around that benefit.

2. Build an Acquisition Team

Build a team that fills the following roles:

• An executive manages the team to ensure the success of the acquisition. This person also reports progress to the board of directors. Your CEO is the best candidate for this position.
• An investment banker handles your finances and looks into the stability of the company you are acquiring.
• An acquisitions lawyer understands the rules of transferring ownership.
• A human resources expert organizes the staff from the new company.
• An IT specialist merges your technical infrastructure with that of the new company.
• A public relations officer promotes the merger to the public. This person informs your business partners and customers about the new merger.

These people will work to provide useful information on the company. They will determine what can become a part of your business and what should not.

3. Do Your Research and Due Diligence

This process has two phases:

First Phase

Check the public information about the company. Check job listings, Web pages, blog entries, conference proceedings, news stories, SEC filings and any other data that you can use when drafting the contract. Look to see if the company fits your plans and for any issues that may devalue the company. This research will be useful during negotiations.

Second Phase

After contacting the company, tour its corporate facilities. Meet the management and check the essential elements of the company. Use this information to answer questions like these:

• What are the actual numbers?
• How successful and sound are the company’s products?
• What is the staff like and how can they improve your company?
• Does the corporate culture match your company’s culture?

Common documents needed

• Summary of business owner requirements
• Three-five years of financial data (P&L and balance sheet)
• Annual review of owner’s benefits
• Summary of top customers

Prepare documents

• Non-Disclosure Agreement

This document makes sure all information considered confidential will be treated carefully and not shared. It also means the information has to be returned upon request.

• Letter of Intent

This document states that you intend on buying the company after signing the NDA and after considering the business is worth.

• Confidential information memorandum

This document provides the prospective buyer with information for the initial offer. It is commonly referred to as the “book” and will typically include: a summary of business operations, summary of industry and market opportuntiies, financial information, and summary of auction process.

• Indication of Interest

With this you express an interest in making a deal in vague but formal written offer.

• Purchase Agreement

You and the seller formalize the agreement in a binding legal contract.

4. Make Your First Offer

If you like what you have found, make an offer. Make a good first impression with clear positive negotiations by offering a fair price. Because you are attempting to buy this company, you need to make the first offer. Remember that the merger work is your responsibility. Also, keep in mind that you are buying more than a company. You are buying the brand, the company’s goodwill, and its people. Be flexible and make an offer between 75 and 90 percent of the company’s worth.

5. Negotiate the Terms

Reach an agreement that ends in the happy merger of two companies. Be firm but don’t undermine your success by being too harsh. Try not to overpay and work toward an agreement that benefits both parties.

If things go well, you will settle on a price, but this process is about more than money. This is about understanding why the owners are making their counteroffer.

Find out why the company is incentivizing the sale. See if there might be something wrong with the company. This will give you a clearer idea of what you are buying.

After you have settled on a price, work over the soft issues. Figure out who stays with the company and who you will have to let go. This part can be emotional, so be sensitive and try to keep as much of the talent in the company as possible.

6. Write Up (and Then Sign) a Contract

Contracts are not the end of a negotiation. They are where things get complicated. The deals don’t end when you go to contract. Having a lawyer recording the negotiation makes things easier. A contract lawyer will find anything you need to talk about.

Company Acquisition

An acquisition is when one company takes over another company, and the acquiring company becomes the owner of the target company. In other words, the acquired company no longer exists following an acquisition since it has been absorbed by the acquirer. The equity shares of the acquiring company continue to trade.

However, the target company’s stock shares no longer trade and its shareholders receive shares of the acquiring company. However, the ratio of the acquirer’s shares to the target company’s shares are based on the buyout terms. Typically, it is not done on a one-to-one basis.

Understandably, the target company’s employees would feel quite anxious. Those who had hired them are likely no longer making critical labor decisions. Beyond the obvious change of being let go or moved around, the continued performance and loyalty of surviving employees depends on the efficacy of the M&A process itself.

Data Acquisition

Data acquisition, or DAQ as it is often referred, is the process of digitizing data from the world around us so it can be displayed, analyzed, and stored in a computer. A simple example is the process of measuring the temperature in a room as a digital value using a sensor such as a thermocouple. Modern data acquisition systems can include the addition of data analysis and reporting software, network connectivity, and remote control and monitoring options.

Whether you are measuring current, voltage, temperature, strain or digital signals, MCC offers high-quality hardware with accompanying software and drivers for a quick and customizable data acquisition solution for your unique application.

Business Acquisition Course

Mergers & Acquisitions Online Course

A well-executed merger deal brings huge potential, but success is not guaranteed. To improve the odds, top M&A specialists use effective tactics to analyse and execute corporate restructuring. These proven skills and strategic approaches are the focus of Imperial’s Mergers & Acquisitions programme. 

This 11-week online programme leads you through both the financial and the strategic aspects of corporate restructuring. You will identify the functions, benefits, and challenges of various forms of mergers and acquisitions, and by the programme’s close you will be equipped to participate in a successful M&A deal, from identifying the benefits for both buyer and seller, to establishing valuation, to leveraging bidding techniques.

You will gain a deeper awareness of the players and processes in mergers and acquisitions, and will learn the frameworks to create value at every stage of the transaction cycle. 

You will experience live online teaching sessions, video lectures, interactive activities and assignments whilst receiving personal support from a dedicated Learning Team.

You will finish the programme prepared to implement your learnings, and with a verified Digital Certificate from Imperial College Business School Executive Education.

This international programme will build on your business knowledge to expand your skills in M&A techniques and transactions. Equipping you with a framework to analyse and participate in the execution of M&A deals, this programme is particularly relevant for individuals including:

• Senior Executives responsible for their firm’s growth, portfolio, and investments, especially those seeking to capture value through mergers to create synergies of revenue, cost, and capital
• Consultants in investment banking and finance who are responsible for sourcing, executing, and managing deals, particularly those looking to create value for companies and build expertise in deal management.
• Mid-level Managers responsible for accounting, valuation, research, financial modelling and smaller-scale investment decisions
• Legal Professionals working as legal counsel to investment banking, finance, or law firms, especially those who ensure compliance for their clients, structure transactions, provide due diligence, and prevent antitrust liability in mergers and acquisitions

Acquisition Business Loans

An acquisition loan is a loan that’s given to a company to purchase a specific asset, to acquire another business, or for other reasons that are laid out before the loan is granted. Typically, a company can only use an acquisition loan for a short window of time and only for the agreed upon purpose.

An acquisition loan is sought out when a company wants to acquire an asset or company but doesn’t have enough liquid capital to do so. The company may be able to get more favorable terms on an acquisition loan because the assets being purchased have a tangible value, as opposed to capital being used to fund daily operations or to release a new product line.

The tangible asset can be used as collateral for the loan. If the borrower defaults on the loan, the lender can reclaim the asset that was purchased with the funds and then liquidate the asset to cover the unpaid portion of the loan.

When an acquisition loan is applied for and approved, it must be used within the allotted time period for the purpose specified at the time of application. If it is not, the loan is no longer available. Once the loan is paid back per the payment schedule, no more funds are available. In this way, it is different from a line of credit.

Acquisition loans can also be used for the purchase of another company. In this instance, the acquiring company has to determine if the target company’s assets constitute adequate collateral to cover the loan needed for its purchase.

It must also determine whether the combined businesses can generate enough cash to pay off the loan, both the principal and the interest. Sometimes, when an acquisition is particularly large and complicated, an investment bank, law firm, and third-party accountant work together on the structure of the loan to make sure it is properly structured.

Acquisition Business Plan

An acquisition plan, in the context of procurement, is a business document specifying all relevant considerations for acquiring specific goods, services or other organizations.

Acquisition plans document factors such as funding, staffing, competitors, technical concerns, as well as risk factors that could have an impact on the acquisition.

Sections of an acquisition plan typically include:

• A statement of need, which documents why the acquisition is desirable and also explores alternatives to the acquisition.
• Conditions relevant to the acquisition.
• Costs.
• Capabilities or qualities of the acquisition that support the business case for it.
• Timelines for delivery and justifications for any unusual urgency.
• Trade-offs between drawbacks and benefits, including metrics such as a risk-reward ratio.
• Potential risks related to the acquisition, including financial, schedule and technical aspects.

Acquisition plans help mitigate the risk involved in decisions about financial outlays and help determine which acquisitions are necessary for continued operation or growth. Careful consideration and accounting also help limit the investment of time and money required to fulfill a given business need. The plans establish a time line marked by milestone events throughout the acquisition process.

In a marketing context, an acquisition plan involves attracting and retaining customers.

Business Acquisition Lawyer

A mergers and acquisitions lawyer handles any paperwork and negotiations when your company is either absorbing another, being absorbed by another, or joining with another company.
If there are any issues that need to go to court after that transition, you might need to find another attorney because a mergers and acquisitions attorney generally doesn’t cover litigation.

The vast majority of acquisitions are undertaken by medium and large-sized companies. For example, with the help of a business acquisition lawyer, these large firms often focus on the buying and selling of public companies. These are generally the largest and most complex deals, are often cross-border and can involve cash and/or stock considerations.

However, deals between smaller private companies can also be multifaceted, particularly where partnerships are involved. In other words, having a business acquisition lawyer by your side to guide you is invaluable in such instances.

A business acquisition lawyer will:

• Identify your business objectives.
• Explain the legal issues –these vary depending on factors of the sale.
• Build a “road map” of acquisition for you, including a timeframe.
• Advise on deals and negotiating tactics.
• Conduct due diligence on the business acquisition target.
• Determine the tax implications of acquiring a business and advise on next steps.
• Assess regulatory obstacles, gain regulatory approval and analyze any other required regulatory approvals.
• Work with local legal counsel for international clients.
• Review all your contracts: business, employment, outsourcing, debt instruments, preferred stock, etc.
• Obtain third-party consents from lenders or parties to other contracts.
• Negotiate the agreement, sign, announce publicly, and close the deal.

Business Acquisition Financing

Finding the right business to purchase, on its own, can be a time-consuming endeavor. Determining how best to finance the purchase — and securing that financing — can be even more complex.

There are various ways to finance a business acquisition, including using one’s own funds or negotiating seller financing. The most common means, however, is through a business acquisition loan.

A business acquisition loan is a small business loan that’s designed for financing the purchase of an existing business or franchise. The amount that can be borrowed and the qualification requirements vary by lender.

The SBA Loan

Many financial institutions prefer to provide loans for business acquisitions only if they’re guaranteed by the Small Business Administration (SBA). There are various SBA-backed loans, but the most common is the 7(a) loan. It’s available in amounts of up to $5  million with terms up to 25 years.

The SBA limits the rate that lenders can charge for an SBA 7(a) loan. Consequently, the rate on a SBA 7(a) loan tends to be less than that on a conventional loan. Financial institutions may favor SBA-backed loans because the SBA guarantees all or part of the loan if the borrower were to default on the terms of the loan. This enables financial institutions to reduce their risk and receive incentives for making what normally might be considered risky loans.

SBA loan eligibility requirements include being a small business located in the United States with a demonstrated need for the loan. The business must operate in an eligible industry and be owned by U.S. citizens. In addition, loan applicants generally must have:

• Good personal and business credit scores
• Sufficient cash flow (both business and personal) to can make the required monthly loan payments
• No recent bankruptcies, foreclosures, or tax liens
• At least 10% down payment and sufficient collateral
• A business plan and financial projections

Industry experience isn’t required, but it’s preferred. Firsthand knowledge about the industry in which the business will operate can provide prospective lenders with greater confidence in making the business acquisition loan. More information on SBA loans can be found at https://www.sba.gov/.

Once the completed loan application package is submitted, applicants may have to wait several months for an approval decision. If business acquisition funding is required quickly, alternative financing may need to be considered.

The Term Loan Option

With a conventional term loan, the borrower receives a lump-sum disbursement from the financial institution. The loan is repaid in fixed installments over a set time period.

These types of loans come with higher interest rates and fees than SBA-backed loans. They’re also often issued in smaller amounts than SBA loans, and require shorter payback terms with larger monthly payments. Repayment terms are often in the five-year range, although this varies by lender.

Most term loans are secured, and borrowers may be asked to sign a personal guarantee, which holds the borrower personally liable if the business fails to make payments.

Approval for a term loan is based on many of the same factors as SBA loans. 

Business Acquisition Loan no Money Down

Wondering “Do business loans require a down payment?” The answer is some don’t. Although it can be challenging and you may not get the best interest rate, no-money-down business loans are available. Learning about each loan type can help you determine the best fit for your situation.

1. Term Loans

Business term loans are one of the most common funding solutions for small businesses. They allow you to borrow large amounts of capital and repay them over years.

One of the benefits of term loans is that you don’t always have to put money down to get one. If your lender looks over your credit and application and deems you a fit, they may only ask that you put up collateral or sign a personal guarantee.

If you’re using the funding to buy commercial real estate or equipment, they might even use that asset as collateral.

Interest rates for these financing products are generally lower than other options and are typically reserved for more qualified borrowers.

2. Equipment Financing

If you need funding to buy or replace equipment for your business, you may not need to put money down as equipment financing could cover up to 100% of the cost, in some cases. However, if the equipment will rapidly depreciate, many lenders will not fund the full 100%, leaving you to come up with a down payment. 

What’s more, because equipment financing is self-collateralizing, it’s one of the easier types of financing to qualify for. So if you’re a new business or haven’t yet established good business credit, equipment financing may be your best bet to get a first-time business loan with no money down.

3. Invoice Financing

Unlike other types of loans that use fixed assets for collateral, invoice financing — a type of accounts receivable financing — doesn’t require a down payment. You essentially sell your unpaid invoices to the lender with invoice financing and the invoices are your collateral.

Invoice financing is a great option for companies in the business-to-business sector with long payment cycles.

4. Business Line of Credit

Although business lines of credit aren’t considered conventional business loans, they can be a great alternative if you don’t have collateral or money for a down payment.

Most lines of credit are revolving: 

• Once you’re approved for a business line of credit, you’re given a pool of money that you can borrow against. When you need access to cash, you simply transfer it into your checking.
• After you draw money against your line of credit, you’ll have to start making payments to your lender to cover the interest charged on the money you’ve used. Anything extra that you pay each month goes toward your loan balance.
• As you pay back your line of credit over time, your pool of available funds builds back up, and you can draw funds again as needed. This process doesn’t require you to apply for a separate loan each time you access a line of credit.

5. SBA Microloans

If you’re looking for a startup business loan with no money down, consider an SBA microloan. These loans are for amounts up to $50,000. Of note, while the SBA does not require a down payment for these types of loans, SBA-approved lenders providing the microloan funding might. 

And though you may not be required to offer a down payment, SBA microloans generally require collateral to secure the funding.

Providing a down payment on a small business loan gives a lender confidence. 

The more you can put down, the better. Putting down more money upfront reduces the amount you have to pay back over time and typically results in lower rates and fees.

Are Business Acquisition Costs Tax Deductible?

You can write off up to $5,000 for some of the costs involved in buying a new business. Specifically, you can write off research and investigation while you’re deciding whether the company is a good buy. This can include surveying the market, product analysis and site visits.

When you start a new business from scratch, you can also deduct the costs of hiring employees, advertising and negotiating with suppliers. That’s not an option when you take over an established company.

For each dollar above $50,000 that you spend on start-up costs, you lose a dollar on the deduction. If you spend $53,000, for instance, you’re left with only a $2,000 write-off. If it costs you $60,000, there’s no deduction. Whatever amount you can claim, you simply report it on your tax return — there’s no extra paperwork to fill out. If you have expenses left over, you have to amortize them over the next few years.

Outside of the $5,000 write-off, the money you spend investigating and researching your business becomes part of your basis in the company. When you sell the company, you subtract your nondeductible research costs from your profits on the sale, lowering the taxable gain. Alternatively, you can amortize them over the 180 months after you buy the company. The IRS leaves it up to you which approach you think will work out better.

Business Acquisition Specialist

An acquisition specialist helps companies find the best goods, services, real estate, or employees for a company. The job titles for these positions vary based on their duties.

The duties and responsibilities that they perform include evaluating potential purchases, negotiating the contract terms and/or purchase price, developing strategies for future acquisitions, producing and maintaining reports, and managing records. The essential skills required to succeed at this position include communication, organization, detail oriented, analytical, and mathematical skills.

Educational qualifications for the position include a bachelor’s degree in finance, accounting, or other related fields. Preference will be given to master’s degree holders. Moreover, prior work experience in a related field is also desirable.

The average hourly pay for the position is $26.44, which amounts to $54,992 annually.

There are certain skills that many acquisition specialists have in order to accomplish their responsibilities. By taking a look through resumes, we were able to narrow down the most common skills for a person in this position.

Acquisition Business Strategy

1 – Horizontal Acquisition

The biggest factor to be factored in drafting any business formula in the market is competition. An entity thriving at the same production stage, capacity, and serving the same class of customers will be considered the competitor in the market. If the entity has to grow in the market, it will have to maximize its market share constantly. Either entity will have to serve better quality products or eliminate the competition by acquiring the competitor. It is termed a horizontal acquisition.

Example of Horizontal Acquisition

Company A and Company B produce cell phones. Now, if Company A acquires Company B, company A will be able to serve the customer base of Company B also under its brand name. It will help in penetrating the market and, as a result, will act as the market leader.

Presently, such acquisitions are highly visible in the information technology sector. Tech giants keep acquiring technology startups and will leverage their customer base. It allows them to cover the uncovered area and make their presence feel across the globe.

2 – Vertical Acquisition

To have all the activity related to any business gives synergy benefits to any entity. Either backward integration or forward integration can make a vertical acquisition. For example, a wholesaler with a monopoly in the trading acquiring a manufacturing unit producing the same commodity will be considered backward integration. It will help in obtaining the inventories at highly reasonable rates.

On the other hand, if the same wholesaler acquires retail stores, it will be considered forwarding integration. It will give direct customer-facing, which will help earn the retail level profit. The above process is termed a vertical acquisition.

Example of Vertical Acquisition

Target Corp. is the best example of vertical acquisition. The company is one of the largest retail chain holders in the United States. It has its own manufacturing unit, distribution channels, wholesale and retail stores, which cover a large customer base and remove any intermediary.

3 – Congeneric Acquisition

Modern society is highly lacking in time. Due to this only, shopping malls have thrived in the market. People prefer a one-stop-shop and try to optimize time for shopping by acquiring all the necessities from the same roof. It helps individuals satisfy their various needs from the same vendor, saving time and putting pressure on them to ensure the better quality of the products.

Moreover, an entity will charge premiums from the customer to offer the various products together, which will help satisfy the customer’s single need. It helps the acquirer enjoy the different areas of the same industry, serving the same customer.

Example of Congeneric Acquisition

Citi Group is the global banking corporation. Its core business focuses on providing banking services to customers. The major crunch is large corporations whose presence is there across the globe. Such large corporations have executives frequently traveling throughout the world for business meetings.

For such executives, there is a huge need to take travel insurance. Citi Group identified this requirement of travel insurance and acquired Travelers Insurance Co. With the help of this, Citi Group is now able to serve large corporate clients, even travel insurance in addition to banking services.

4 – Conglomerate Acquisition Type

Conglomerate Acquisition occurs in between entities with a completely different product line, different geographies, and different customer base and has a completely different business model. It means such firms will have nothing in common with them, and they plan to undertake such acquisitions to diversify their risk and try to cover the new market.

Such types of acquisition will help provide the existing products to the customers of the newly acquired company and vice versa. Such a diversification strategy helps the firm diversify the business, synergy benefits, increase customer base, and achieve better economies of scale.

Example of Conglomerate Acquisition

The best example of a conglomerate is the merger between PayPal and eBay. Around 2002, PayPal was not able to maintain its market reputation. The e-commerce giant acquired PayPal just by paying around a billion dollars at that time. However, presently eBay has a market value of a hundred billion dollars.

eBay had spanned off PayPal after its acquisition. As a result, PayPal has revolutionized the payment system and challenged the traditional payment method. These acquisitions are considered a benchmark step for bringing modern change in Silicon Valley.

Funding a Business Acquisition

Acquisition financing is the capital that is obtained for the purpose of buying another business. Acquisition financing allows users to meet their current acquisition aspirations by providing immediate resources that can be applied to the transaction.

There are several different choices for a company that is looking for acquisition financing. The most common choices are a line of credit or a traditional loan. Favorable rates for acquisition financing can help smaller companies reach economies of scale, which is generally viewed as an effective method for increasing the size of the company’s operations.

A company seeking acquisition financing can apply for loans available through traditional banks as well as from lending services that specialize in serving this market. Private lenders may offer loans to those companies that do not meet a bank’s requirements. However, a company may find that funding from private lenders includes higher interest rates and fees compared to bank financing.

A bank might be more inclined to approve financing if the company to be acquired has a steady stream of revenues, steady or growing EBITDA, which is a cash metrics that would help the acquirer to pay back the debt obligations from the loan on the acquisition, substantial or sustained profits, as well as valuable assets for collateral.

By comparison, securing bank approval can be problematic when attempting to finance the acquisition of a company that largely has receivables rather than cash flow.

Below is an overview of all the acquisition financing options

1. Company Funds
2. Company Equity
3. Earnout 
4. Leveraged Buyout
5. Bank Loan
6. SBA Loan
7. Asset-Backed Loan
8. Issuing Bonds
9. Third-Party Financing
10. Joint Venture

Acquisition Entry Mode

An acquisition is a transaction in which a firm gains control of another firm by purchasing its stock, exchanging the stock for its own, or, in the case of a private firm, paying the owners a purchase price. In our increasingly flat world, cross-border acquisitions have risen dramatically. In recent years, cross-border acquisitions have made up over 60 percent of all acquisitions completed worldwide.

Acquisitions are appealing because they give the company quick, established access to a new market. However, they are expensive, which in the past had put them out of reach as a strategy for companies in the undeveloped world to pursue. What has changed over the years is the strength of different currencies.

The higher interest rates in developing nations has strengthened their currencies relative to the dollar or euro. If the acquiring firm is in a country with a strong currency, the acquisition is comparatively cheaper to make.

Each mode of market entry has advantages and disadvantages. Firms need to evaluate their options to choose the entry mode that best suits their strategy and goals.

Type of Entry	Advantages	Disadvantages
Exporting	Fast entry, low risk	Low control, low local knowledge, potential negative environmental impact of transportation
Licensing and Franchising	Fast entry, low cost, low risk	Less control, licensee may become a competitor, legal and regulatory environment (IP and contract law) must be sound
Partnering and Strategic Alliance	Shared costs reduce investment needed, reduced risk, seen as local entity	Higher cost than exporting, licensing, or franchising; integration problems between two corporate cultures
Acquisition	Fast entry; known, established operations	High cost, integration issues with home office
Greenfield Venture (Launch of a new, wholly owned subsidiary)	Gain local market knowledge; can be seen as insider who employs locals; maximum control	High cost, high risk due to unknowns, slow entry due to setup time

How to Acquire Entrepreneurship Skills

Creating a successful business is not easy. If you consider becoming an entrepreneur, you should learn and develop entrepreneurial skills to help you manage a business. Developing various skillsets also increases your entrepreneurial competencies because entrepreneurial skills have applications in different job roles and industries.

As an entrepreneur, you can take on many business roles inside your business. For this reason, you need to possess a variety of skills to support every need.

Some critical skillsets for entrepreneurial success are:

1. Improve your interpersonal skills

An entrepreneur, especially someone just starting, is essential to have good interpersonal skills. Entrepreneurs need to be confident and likable, and you need to make sure to polish those qualities early on. Startup founders, for example, get to meet many people, and pitching their ideas is one of the most important things they have to do to convince investors. You can improve your interpersonal skills by practicing in your daily conversations with others.

2. Go to events and workshops

Attending business events and workshops for entrepreneurs is one of the best alternative ways to develop your entrepreneurial skills. Not only can you learn valuable things that you can apply in your business, but you also get to network with other business owners. These contacts may prove valuable in the long run, and you will get to know experienced entrepreneurs who can give you valuable insights.

3. Find an experienced mentor

Seeking out mentors is like asking questions in class and can be extremely valuable to learn and develop your entrepreneurial skills. You may spend a day with someone to see how they run their company, or you could meet with professional groups to discuss various day-to-day business needs. You will be amazed to find that many experienced and successful entrepreneurs are more than willing to mentor you and provide professional guidance.

4. Build your leadership skills

To develop your leadership abilities crucial for any business or project team, you can look for opportunities to be the team leader or manager. At the same time, you should constantly seek feedback from your coworkers to find out how you perform as a leader. Feedback will help you build your leadership skills and improve your management capabilities.

5. Figure out how to manage your finances

Finally, one of the essential entrepreneurial skills that you need to learn and develop is how to manage your finances. Usually, as soon as entrepreneurs start a new business, they are also in charge of finance until it takes off. Although you could hire a professional to help you, it would probably be a good idea to take it upon you at least for some time.

Finance is integral to any business, and you should spend time learning all the financial processes of your business. Only by doing so can you better understand your business and how it can make a profit. Knowing your business finances can also make you sound more confident while pitching about your company and eliminate the possibility of getting asked a question that you don’t have an answer to.

Acquisition Advantages and Disadvantages

Acquisitions offer the following advantages for the acquiring party:

1. Reduced entry barriers

With M&A, a company is able to enter into new markets and product lines instantaneously with a brand that is already recognized, with a good reputation and an existing client base. An acquisition can help to overcome market entry barriers that were previously challenging.

Market entry can be a costly scheme for small businesses due to expenses in market research, development of a new product, and the time needed to build a substantial client base.

2. Market power

An acquisition can help to increase the market share of your company quickly. Even though competition can be challenging, growth through acquisition can be helpful in gaining a competitive edge in the marketplace. The process helps achieves market synergies.

3. New competencies and resources

A company can choose to take over other businesses to gain competencies and resources it does not hold currently. Doing so can provide many benefits, such as rapid growth in revenues or an improvement in the long-term financial position of the company, which makes raising capital for growth strategies easier. Expansion and diversity can also help a company to withstand an economic slump.

4. Access to experts

When small businesses join with larger businesses, they are able to access specialists such as financial, legal or human resource specialists.

5. Access to capital

After an acquisition, access to capital as a larger company is improved. Small business owners are usually forced to invest their own money in business growth, due to their inability to access large loan funds. However, with an acquisition, there is an availability of a greater level of capital, enabling business owners to acquire funds needed without the need to dip into their own pockets.

6. Fresh ideas and perspective

M&A often helps put together a new team of experts with fresh perspectives and ideas and who are passionate about helping the business reach its goals.

Acquisition can also create some hitches and disadvantage your business. You must take these potential pitfalls into consideration before pursuing an acquisition.

1. Culture clashes

A company usually has its own distinct culture that has been developing since its inception. Acquiring a company that has a culture that conflicts with yours can be problematic. Employees and managers from both companies, as well as their activities, may not integrate as well as anticipated. Employees may also dislike the move, which may breed antagonism and anxiety.

2. Duplication

Acquisitions may lead to employees duplicating each other’s duties. When two similar businesses combine, there may be cases where two departments or people do the same activity. This can cause excessive costs on wages. M&A transactions, therefore, often lead to reorganization and job cuts to maximize efficiencies. However, job cuts can reduce employee morale and lead to low productivity.

3. Conflicting objectives

The two companies involved in the acquisition may have distinct objectives since they have been operating individually before. For instance, the original company may want to expand into new markets, but the acquired company may be looking to cut costs. This can bring resistance within the acquisition that can undermine efforts being made.

4. Poorly matched businesses

A business that doesn’t look for expert advice when trying to identify the most suitable company to acquire may end up targeting a company that brings more challenges to the equation than benefits. This can deny an otherwise productive company the chance to grow.

5. Pressure on suppliers

Following an acquisition, the capacity of the suppliers of the company may not be enough to provide the additional services, supplies, or materials that will be needed. This may create production problems.

6. Brand damage

M&A may hurt the image of the new company or damage the existing brand. An evaluation of whether the two different brands should be kept separate must be done before the deal is made.

Acquisition of Turnover

Turnover is an accounting concept that calculates how quickly a business conducts its operations. Most often, turnover is used to understand how quickly a company collects cash from accounts receivable or how fast the company sells its inventory.

Common forms of turnover include accounts receivable turnover, inventory turnover, portfolio turnover, and working capital turnover. Companies can better assess the efficiency of their operations through looking at a range of these ratios, often with the goal of maximizing turnover.

In the investment industry, turnover is defined as the percentage of a portfolio that is sold in a particular month or year. A quick turnover rate generates more commissions for trades placed by a broker.

Overall turnover is a synonym for a company’s total revenues. It is commonly used in Europe and Asia.

Acquisition Agency

Acquiring agency means a state agency, person, private agency or public agency which has the authority to acquire property by eminent domain under state law, and a state agency, private agency or public agency or person which does not have such authority.

Acquire Business Sales

ACQUIRE represent sellers of UK companies positioned in the £500,000 to £20m turnover range. To confidentially register your interest in Selling a Company, or to view their current list of Companies For Sale, visit the website at www.acquirebusinesssales.co.uk.

ACQUIRE sell Companies with Corporate, Commercial and Industrial Business Activities to both UK and International Acquirers. Their responsible Company Sale and Deal Management services are totally confidential and focus on maximising deal values for our Clients. They work hard to ensure there is post-sale continuity for management and employees, whilst minimising the sellers transactional risk.

ACQUIRE represent business owners throughout the UK that are looking to sell for many different personal and commercial reasons. For some of the Clients the decision to sell is prompted by retirement, whilst for others it can be a matter of timing.

Acquisition Business Advisory Services

Merger and Acquisition Advisory firms are companies that assist and provide necessary guidance and expertise to those companies that plan to either buy or sell or undertake complete restructuring of their firms. Such firms function like personal financial advisors and can prove to be game-changer if they effectively execute the transaction on behalf of a company.

The process of selling or restructuring a company is cumbersome and needs the help of experts. This is where M&A Advisory Firms come into play and such a firm can be aptly called a “ Business Coach” which can steer a company towards a successful corporate dealing.

M&A Advisory Firms play a crucial role in this era of mergers and acquisitions ( or takeover) as it works out a feasible plan and offers its clients tailor-made solutions which simplify the process of mergers and acquisitions.

• Quicker Turnaround: M&A Advisory Firms play an important role for clients. The biggest advantage is that hiring an M&A Advisory Firm helps in saving time. The company which hires it is not required to do research and everything on its own. The firm does it on the company’s behalf. As the M&A Firm works out all nitty-gritty of mergers and acquisitions in a well-researched and calculated manner, the possibility of its success is high and cannot be ruled out.
• Ensures Genuine Buyer:  Usually, M&A Advisory Firms have a lot of contacts and business connections that help in getting a suitable buyer. They try and headhunt genuine buyers which would have been difficult for its client to get otherwise. Being a professional body one can trust and rely on the M&A Advisory Firm experts who can find a genuine and bonafide buyer for the business. 
• Helps in Negotiating Better Prices for the Company: M&A Advisory Firm helps a company enter into a right and worthy deal. Their expertise in analyzing the business potential, and gauging the market interest and potential buyers’ interest work together to complete the transaction at the best possible sale price.
• Stress-free process: Its ideal to shift the stress and hassles of the tedious processes of an M&A transaction to the expertise of an M&A Firm. Delegating these tasks to a professional M&A firm can free you from unnecessary worries about these complex transactions. A highly professional M&A Firm will always try to get you the best deal possible with ease.

Acquisition Business Analysis

Understanding an acquisition candidate’s market is a critical part of the acquisition due diligence process. To thoroughly understand the market, it is necessary to gather intelligence independently rather than rely solely on the information provided by the target company. Therefore, many companies seek third party, unbiased information on the market and the customer base before making a significant acquisition investment.

In producing acquisition due diligence studies, RSR will quickly assess an acquisition candidate’s market position, and determine the likelihood of success in making the acquisition.

Benefits Achieved

Detailing the relevant threats and opportunities that will impact the potential acquisition.

Market Analysis

• Market size and growth
• Market segmentation
• Market shares of the major competitors
• The candidate’s key strengths and weaknesses
• Key trends and factors affecting the market
• Key regulations impacting the market
• Potential threat from new products, suppliers, etc

Customer Analysis

• Customer’s current and future purchases
• Customer’s view of the acquisition candidate relative to other suppliers

Business Acquisition Accounting

Acquisition accounting is a set of formal guidelines describing how assets, liabilities, non-controlling interest (NCI) and goodwill of a purchased company must be reported by the buyer on its consolidated statement of financial position.

The fair market value(FMV) of the acquired company is allocated between the net tangible and intangible assets portion of the balance sheet of the buyer. Any resulting difference is regarded as goodwill. Acquisition accounting is also referred to as business combination accounting.

International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) require all business combinations to be treated as acquisitions for accounting purposes, meaning that one company must be identified as an acquirer and one company must be identified as an acquiree even if the transaction creates a new company.

The acquisition accounting approach requires everything to be measured at FMV, the amount a third-party would pay on the open market, at the time of acquisition — the date that the acquirer took control of the target company. That includes the following:

• Tangible assets and liabilities: Assets that have a physical form, including machinery, buildings, and land.
• Intangible assets and liabilities: Nonphysical assets, such as patents, trademarks, copyrights, goodwill, and brand recognition.
• Non-controlling interest: Also known as minority interest, this refers to a shareholder owning less than 50% of outstanding shares and having no control over decisions. If possible, the fair value of non-controlling interest can be derived from the share price of the acquiree.
• Consideration paid to the seller: The buyer can pay in many ways, including cash, stock or a contingent earnout. Calculations must be provided for any future payment obligations.
• Goodwill: Once all those steps have been taken, the purchaser must then calculate if there is any goodwill. Goodwill is recorded in a situation when the purchase price is higher than the sum of the fair value of all identifiable tangible and intangible assets bought in the acquisition.

Business Acquisition Broker

A business broker is an individual or company that assists in the purchase and sale of small, main street businesses. These agents can take on a variety of tasks to help their clients achieve their acquisition and offloading objectives, and might specialize in companies belonging to certain industries or possessing specific, unique characteristics.

Transferring ownership of a company is a complex process. Among the various challenges that must be overcome include determining a fair valuation, making sure the company’s finances and accounting records are in order, negotiating a price, going through escrow and closing the sale. 

Business brokers not only manage these steps but also ensure confidentiality by requiring interested buyers to agree not to disclose the details of the potential business sale. Business brokers, which may work independently or as part of a larger brokerage firm, can also help with licensing and permitting requirements and weed out unqualified suitors.

Those wishing to buy or sell a company can locate business brokers through attorneys, accountants, and professional associations, such as the International Business Brokers Association (IBBA).

Business Acquisition Due Diligence Checklist

The following due diligence checklist is useful as a general list of items to investigate as part of an acquisition analysis, though the full range of questions will probably not be needed. Some questions may need to be added for an industry-specific acquisition, while far fewer will be needed for asset acquisition.

Why Selling?

There must be a good reason why the owners of a business want to sell it – and they may be excellent ones, such as raising funds for an estate tax payment, a divorce, or retirement. However, there may also be hidden reasons, such as the expectation of a lawsuit or a downward trend in the company’s prospects, that are really driving the sale. One of these hidden reasons could present such a significant problem that the acquirer must back out of the transaction.

Prior Sale Efforts

Have the owners of the target company attempted to sell it before? If so, find out what happened. Former prospective buyers are unlikely to talk about the issues they encountered, but an ongoing series of unsuccessful sale discussions probably point toward underlying operational, risk, or valuation issues that must be uncovered.

Business Plans

Obtain a copy of not only the most recent business plan, but also the earlier versions of it for the past few years. The team should peruse these documents and compare them to the company’s actual performance and activities, to see if the management team is capable of implementing its own plans.

Complexity

How complex is the business? If it involves a large number of disparate subsidiaries that deal with many products and services, it may be too difficult for the acquirer to manage the operation. These types of businesses are also difficult to grow. Conversely, a company with a simple product line or service is an excellent acquisition target.

Market Review

Review the primary players in the marketplaces in which the target competes; determine the competitive niches occupied by each one, and how their actions may impact those of the target company. Also, monitor trends in the industry to see if there have been or are expected to be changed in profit levels or the size of the market. Further, examine the expected impact of new technology on the market, and how the company is positioned in relation to those technologies.

Ease of Entry

Is this an industry in which competitors can enter and exist easily, or are there significant barriers to entry? Has there been a history of new competitors arriving and taking significant market share, or does market share appear to be locked in among the current players?

Related Acquisitions

Have there been other acquisitions in the industry lately? Have other businesses put themselves up for sale? What is driving these trends? It is possible that the industry is going through a period of consolidation, which may impact the price the acquirer offers to the target company.

Reporting Relationships Chart

Obtain a chart that states the reporting relationships within the business. This is useful for determining which managers are in charge of which sections of the business, so that the team knows who to contact for more information. It also tells the team who to investigate for roles in the business if the acquisition is completed.

Geographical Structure

If the business is based on sales regions, examine how the organization is structured to support regional sales. Is there an adequate infrastructure at the regional level for such activities as sales, marketing, distribution, and storefronts? If there are weaknesses, what could the acquirer do that would improve profits?

Organizational Legal Structure Chart

Obtain a chart that states which subsidiary entities are owned by which parent companies, where each one is incorporated, and the ownership of each one. This is an important document, for the team needs to know if there are any hidden majority or minority investors buried in the organizational structure of the company.

Business Acquisition Grants

Business Acquisition Funding is commonly sought but less commonly understood. There is a veritable alphabet soup of terms and descriptions used to describe the many forms of Business Acquisition Funding. They range from terms used by banks and capital providers that deliver various types of funding to terms used by entrepreneurs and business owners.

There are two basic types of funding used for business acquisitions – loans and equity investment. Loans can be provided by banks, finance companies, business development companies, hedge funds and mezzanine funds. The type of loan available at each is different and depends on the company size, business type and credit profile.

Generally speaking, business acquisitions at reasonable valuations require some combination of loans and equity investment to consummate. Within the loan category for business acquisition funding, there are two basic distinctions. Asset-based loans versus cash flow-based loans. Asset-based loans are loans against the value of the collateral. Cash flow-based loans are loans against the cash flow value of the business.

Banks specialize in asset-based lending where they are secured and have little risk. Mezzanine funds and other finance companies specialize in cash flow-based loans where there is little collateral to secure their loan. Often, banks will not be able to provide enough business acquisition funding to close.

They provide only a portion of the business funding needed and the rest comes from other lenders and equity investors. Mezzanine lenders are a powerful force in the business acquisition funding industry due to their ability to provide funding based on a multiple of a company’s EBITDA. This gives a business acquirer most if not all of the business funding they need to close a deal. In many cases, it eliminates the need for an equity investor.

Most companies should think about bringing an M&A expert onto their team when deciding the best form of business acquisition funding. There are a lot of factors to consider when deciding on the best structure and type of capital. Not all types of capital are created equal and not all capital types will give you the advantages of availability, flexibility and scalability. Ultimately, the best providers of business acquisition capital will tick the boxes on all three of these criteria.

Business Acquisition Jobs

As an acquisitions manager, you’ll negotiate, seek out, finalize, and organize purchasing deals for your employer. In many cases, acquisitions are grouped with mergers and your main job function will be acquiring other companies and merging them into your company.

In the business world, an acquisition is the purchase or takeover of one company by another company. As a manager, you’re responsible for ensuring any acquisition made by your employer is sound and reasonable. This involves projecting how the transaction will affect your company and determining the financial impact of a takeover. You may also develop and execute the acquisitions strategy as well as ensure the process goes smoothly.

Part of your job involves seeking out suitable acquisitions. You may review companies to see if they’ll make good additions to your company. Arbitrating an acquisition might also fall to you, requiring you to maintain close contact with top executives in your company. You may be required to discuss the terms of the deal and negotiate those terms to suit the needs of both your company and the company you want to acquire.

Important Facts About Acquisitions Managers

Similar Occupations	Purchasing managers, financial managers, marketing managers
Work Environment	Most acquisitions managers will work in an office setting with occasional travel required
Key Skills	Analytical skills, math skills, communication, decision-making, negotiating aptitude
Salary (May 2020)	$132,660 per year (mean annual wage for all purchasing managers)
Job Outlook (2019 – 2029)	3% growth (for all purchasing managers)

Business Acquisition Loan Requirements

Banks participating in the SBA loan program usually consider the following criteria when evaluating a potential borrower:

1. Reasonable personal credit

To get a business loan, the borrower (or some of the borrowers, if a group is seeking a loan) must have decent personal credit. Most institutions will work with credit scores from 650 to 690.

2. Signed letter of intent

You give the seller of the business a signed letter of intent that states the proposed terms for the acquisition. You must provide a signed letter of intent to get a term sheet. There are no exceptions to this requirement.

This requirement is often viewed as a potential catch-22. Buyers don’t want to make an offer to the seller until they have qualified for funding. And lending institutions are not willing to provide terms until they see the letter of intent. However, the solution is simple. A well-crafted letter of intent should contain a clause stating that the offer is contingent on getting financing. This clause is common in business acquisitions and gives the buyer a reasonable time-frame to find financing.

3. Borrower information form (Form 1919)

This form is used to collect information about the principal(s), key individuals in the business, and guarantors, along with information about any current or past government financing.

4. Personal financial statement (Form 413)

The personal financial statement contains all relevant financial information about you, your business partners, each owner with more than 20% equity, and each guarantor. This detailed form is used to determine your repayment ability and creditworthiness. This form can be intimidating – don’t let it be. Remember that the SBA provides the bank with a guarantee on your behalf specifically to help borrowers that wouldn’t otherwise qualify for a loan.

5. Three years of personal/corporate tax returns

As part of the application package, you need to provide three years of personal tax returns. Additionally, you must provide three years of corporate tax returns on the business that you are looking to acquire.

6. Three years of business financial statements

As part of the application package, you must provide three years of financial statements for the business you plan to acquire. Most banks ask for Profit and Loss Statements, Balance Sheets, and Cash Flow Statements.

7. Debt schedule

As part of the application package, you have to provide a debt schedule that lists all the debts/liabilities of the business.

8. Management experience

To qualify for a loan, some (or all) of the applicants must have substantial business experience. It is better if your experience is in the same industry of the business that you are trying to purchase, but that is not always a requirement. Ultimately, you have to prove to the participating lender that you are able to manage the business that you plan to buy and that you are a safe risk.

9. Debt service coverage ratio

The debt service coverage ratio is the ratio of cash that is available to service debt, interest, and lease payments. It’s calculated by dividing the Net Operating Income by the Debt Service. The higher the ratio, the easier it is to obtain a loan. At a minimum, the business you are going to buy should have a debt service coverage ratio of 1.15.

10. Down payment

As a rule, SBA bank participants prefer that the owners make a down payment of 20% of the total value of the business. Yes, this number is high, but it shows the lender that you are committed to the business. You can reduce your down-payment requirement by convincing the seller to extend some financing to you.

Acquisition Business Strategies

Acquisition strategy involves finding a methodology for the acquisition of target companies that generates value for the acquirer. The use of an acquisition strategy can keep a management team from buying businesses for which there is no clear path to achieving a profitable outcome. Instead of simple growth, an acquirer must understand exactly how its acquisition strategy will generate value.

This cannot be a simplistic determination to combine two businesses, with a generic statement that overlapping costs will be eliminated. The management team must have a specific value proposition that makes it likely that each acquisition transaction will generate value for the shareholders. Some of these value propositions (strategies) are as follows.

Adjacent Industry Strategy

An acquirer may see an opportunity to use one of its competitive strengths to buy into an adjacent industry. This approach may work if the competitive strength gives the company a major advantage in the adjacent industry.

Diversification Strategy

A company may elect to diversify away from its core business in order to offset the risks inherent in its own industry. These risks usually translate into highly variable cash flows which can make it difficult to remain in business when a bout of negative cash flows happens to coincide with a period of tight credit where loans are difficult to obtain.

For example, a business environment may fluctuate strongly with changes in the overall economy, so a company buys into a business having more stable sales.

Full Service Strategy

An acquirer may have a relatively limited line of products or services, and wants to reposition itself to be a full-service provider. This calls for the pursuit of other businesses that can fill in the holes in the acquirer’s full-service strategy.

Geographic Growth Strategy

A business may have gradually built up an excellent business within a certain geographic area, and wants to roll out its concept into a new region. This can be a real problem if the company’s product line requires local support in the form of regional warehouses, field service operations, and/or local sales representatives. Such product lines can take a long time to roll out, since the business must create this infrastructure as it expands.

The geographical growth strategy can be used to accelerate growth by finding another business that has the geographic support characteristics that the company needs, such as a regional distributor, and rolling out the product line through the acquired business.

Industry Roll-Up Strategy

Some companies attempt an industry roll-up strategy, where they buy up a number of smaller businesses with small market share to achieve a consolidated business with a significant market share. While attractive in theory, this is not that easy a strategy to pursue. In order to create any value, the acquirer needs to consolidate the administration, product lines, and branding of the various acquirees, which can be quite a chore.

Low-Cost Strategy

In many industries, there is one company that has rapidly built market share through the unwavering pursuit of the low-cost strategy. This approach involves offering a baseline or mid-range product that sells in large volumes, and for which the company can use best production practices to drive down the cost of manufacturing. It then uses its low-cost position to keep prices low, thereby preventing other competitors from challenging its primary position in the market.

This type of business needs to first attain the appropriate sales volume to achieve the lowest-cost position, which may call for a number of acquisitions. Under this strategy, the acquirer is looking for businesses that already have significant market share and products that can be easily adapted to its low-cost production strategy.

Market Window Strategy

A company may see a window of opportunity opening up in the market for a particular product or service. It may evaluate its own ability to launch a product within the time during which the window will be open, and conclude that it is not capable of doing so. If so, its best option is to acquire another company that is already positioned to take advantage of the window with the correct products, distribution channels, facilities, and so forth.

Product Supplementation Strategy

An acquirer may want to supplement its product line with similar products of another company. This is particularly useful when there is a hole in the acquirer’s product line that it can immediately fill by making an acquisition.

Sales Growth Strategy

One of the most likely reasons why a business acquires is to achieve greater growth than it could manufacture through internal growth, which is known as organic growth. It is very difficult for a business to grow at more than a modest pace through organic growth, because it must overcome a variety of obstacles, such as bottlenecks, hiring the right people, entering new markets, opening up new distribution channels, and so forth. Conversely, it can massively accelerate its rate of growth with an acquisition.

Synergy Strategy

One of the more successful acquisition strategies is to examine other businesses to see if there are costs that can be stripped out or revenue advantages to be gained by combining the companies. Ideally, the result should be greater profitability than the two companies would normally have achieved if they had continued to operate as separate entities. This strategy is usually focused on similar businesses in the same market, where the acquirer has considerable knowledge of how businesses are operated.

Vertical Integration Strategy

A company may want to have complete control over every aspect of its supply chain, all the way through to sales to the final customer. This control may involve buying the key suppliers of those components that the company needs for its products, as well as the distributors of those products and the retail locations in which they are sold.

Business Acquisition Manager Salary

Acquisitions Managers in America make an average salary of $97,768 per year or $47 per hour. The top 10 percent makes over $145,000 per year, while the bottom 10 percent under $65,000 per year.

Some places are better than others when it comes to starting a career as an acquisitions manager. The best states for people in this position are Connecticut, Maryland, Virginia, and Pennsylvania. Acquisitions managers make the most in Connecticut with an average salary of $118,478.

Whereas in Maryland and Virginia, they would average $115,236 and $115,154, respectively. While acquisition managers would only make an average of $110,890 in Pennsylvania, you would still make more there than in the rest of the country.

Business Acquisition Questions

Acquiring a business without full knowledge of aspects such as financing, employee relationships, and growth potential can lead to hardship and even failure later down the road. Even though the amount of questions to ask is virtually unlimited, there is vital information that you need to know first and foremost.

We have provided a list of questions that need to be asked right off the bat when vetting a business. Discussing these questions with the help of an intermediary can prevent later confusion and heartache once the deal has been done.

1. Why are you selling?

The most important question as it is very telling into the owner’s insight. Every business owner is different when it comes to the reasoning of why they want to sell their business. Buyers should pay close attention to the motivating factors as to why the seller wants to sell. There are numerous reasons why an owner would want to sell their business. The seller should be confident and comfortable when presenting their exit reasons.

2. Who are the key employees within the company? Will they remain with the company?

Understanding who is most involved within the company is necessary to know before even thinking about making a deal. Once the business is passed on to a new owner, having key employees on hand to provide a smooth transition is paramount. Employee relationships and agreement among partners is essential in a drama free transition.

Scoping out the leadership dynamic of the company is a smart idea when first inquiring about a business. Buying a business entails building new relationships among the people who have greater experience in working with the company.

3. What is the growth potential like?

The goal of many potential buyers and future business owners is to grow the company to a larger and more profitable point after they have acquired it. Buyers usually look for tendencies in the profitability of the business, as well as sales and gross margin. Finding out the status of these trends is crucial and can potentially help predict the future income of the business. It is important for the seller of the business to present the most viable expansion opportunities before moving forward.

4. What opportunities exist in this market in the years ahead?

The future of an industry can change immensely based on economic, social, environmental, technological, and demographic trends. These trends vary depending on the industry can help determine the market in the years ahead. Paying attention to these trends as well as projected revenue for the following year can predict the status of the market and what opportunities might exist in the future. Getting the sellers honest feedback on growth opportunities is key to the decision-making process.

5. What are the various kinds of problems that arise in your business? How are these handled?

The problems associated with a business often speak much louder than the advantages. You want to be aware of potential red flags and how these could affect certain business aspects later down the road. Being concerned about risk factors such as poor bookkeeping, potential lawsuits, or inaccurate financials associated with the company can prepare you for potential roadblocks in the future.

6. How well documented are the financials of the business?

Make sure to be informed about the financial organization of the business before moving forward. Although the truth will most likely be presented during due diligence, it is important to touch on the management of statements and financials. Inaccurate status and accessibility of a company’s books can be a major deal killer.

7. What skills do I need to have to run this business adequately?

If you do not possess certain skills that are associated with the business, you might have a challenging time adjusting. However, there are many instances in which the buyer is capable of learning the necessary skills needed to maintain the success of a business. Scoping out the dynamics of the company can determine what skills and leadership qualities are needed to run the business effectively.

Other important questions to ask

• What will happen when others realize you have sold the company?
• Do you have any past or current lawsuits?
• What does your ideal succession plan look like?
• Who are your primary competitors?
• What are you able to accomplish for your customers?

As for the seller, it is critical to be honest with potential buyers in discussing questions about your business. Preparing for and responding to these questions as accurately as possible is extremely important. If you aren’t completely up-front and open from the beginning, it will not be long before the buyer finds out the truth during due diligence.

Business Acquisition Valuation Methods

Acquisition valuation involves the use of multiple analyses to determine a range of possible prices to pay for an acquisition candidate. There are many ways to value a business, which can yield widely varying results, depending upon the basis of each valuation method.

Some methods assume a valuation based on the assumption that a business will be sold off at bankruptcy prices, while other methods focus on the inherent value of the intellectual property and the strength of a company’s brands, which can yield much higher valuations. There are many other valuation methods lying between these two extremes. The following are examples of business valuation methods.

Liquidation Value

Liquidation value is the amount of funds that would be collected if all assets and liabilities of the target company were to be sold off or settled. Generally, liquidation value varies depending upon the time allowed to sell assets. If there is a very short-term “fire sale,” then the assumed amount realized from the sale would be lower than if a business were permitted to liquidate over a longer period of time.

Real Estate Value

If a company has substantial real estate holdings, they may form the primary basis for the valuation of the business. This approach only works if nearly all of the assets of a business are various forms of real estate. Since most businesses lease real estate, rather than owning it, this method can only be used in a small number of situations.

Relief from Royalty

What about situations where a company has significant intangible assets, such as patents and software? How can you create a valuation for them? A possible approach is the relief-from royalty method, which involves estimating the royalty that the company would have paid for the rights to use an intangible asset if it had to license it from a third party. This estimation is based on a sampling of licensing deals for similar assets. These deals are not normally made public, so it can be difficult to derive the necessary comparative information.

Book Value

Book value is the amount that shareholders would receive if a company’s assets, liabilities, and preferred stock were sold or paid off at exactly the amounts at which they are recorded in the company’s accounting records. It is highly unlikely that this would ever actually take place, because the market value at which these items would be sold or paid off might vary by substantial amounts from their recorded values.

Enterprise Value

What would be the value of a target company if an acquirer were to buy all of its shares on the open market, pay off any existing debt, and keep any cash remaining on the target’s balance sheet? This is called the enterprise value of a business, and it is the sum of the market value of all shares outstanding, plus total debt outstanding, minus cash.

Enterprise value is only a theoretical form of valuation because it does not factor in the effect on the market price of a target company’s stock once the takeover bid is announced. Also, it does not include the impact of a control premium on the price per share. In addition, the current market price may not be indicative of the real value of the business if the stock is thinly traded, since a few trades can substantially alter the market price.

Multiples Analysis

It is quite easy to compile information based on the financial information and stock prices of publicly-held companies, and then convert this information into valuation multiples that are based on company performance. These multiples can then be used to derive an approximate valuation for a specific company.

Discounted Cash Flows

One of the most detailed and justifiable ways to value a business is through the use of discounted cash flows. Under this approach, the acquirer constructs the expected cash flows of the target company, based on extrapolations of its historical cash flow and expectations for synergies that can be achieved by combining the two businesses. A discount rate is then applied to these cash flows to arrive at a current valuation for the business.

Replication Value

An acquirer can place a value upon a target company based upon its estimate of the expenditures it would have to incur to build that business “from scratch.” Doing so would involve building customer awareness of the brand through a lengthy series of advertising and other brand building campaigns, as well as building a competitive product through several iterative product cycles. It may also be necessary to obtain regulatory approvals, depending on the products involved.

Comparison Analysis

A common form of valuation analysis is to comb through listings of acquisition transactions that have been completed over the past year or two, extract those for companies located in the same industry, and use them to estimate what a target company should be worth.

The comparison is usually based on either a multiple of revenues or cash flow. Information about comparable acquisitions can be gleaned from public filings or press releases, but more comprehensive information can be obtained by paying for access to any one of several private databases that accumulate this information.

Influencer Price Point

A potentially important point impacting price is the price at which key influencers bought into the target company. For example, if someone can influence the approval of a sale, and that person bought shares in the target at $20 per share, it could be exceedingly difficult to offer a price that is at or below $20, irrespective of what other valuation methodologies may yield for a price. The influencer price point has nothing to do with valuation, only the minimum return that key influencers are willing to accept on their baseline cost.

IPO Valuation

A privately-held company whose owners want to sell it can wait for offers from potential acquirers, but doing so can result in arguments over the value of the company. The owners can obtain a new viewpoint by taking the company public in the midst of the acquisition negotiations. This has two advantages for the selling company.

First, it gives the company’s owners the option of proceeding with the initial public offering and eventually gaining liquidity by selling their shares on the open market. Also, it provides a second opinion regarding the valuation of the company, which the sellers can use in their negotiations with any potential acquirers.

Strategic Purchase

The ultimate valuation strategy from the perspective of the target company is the strategic purchase. This is when the acquirer is willing to throw out all valuation models and instead consider the strategic benefits of owning the target company.

Read Also: How Machine Learning Can Improve Real-time Bidding in Digital Marketing

For example, an acquirer can be encouraged to believe that it needs to fill a critical hole in its product line, or to quickly enter a product niche that is considered key to its future survival, or to acquire a key piece of intellectual property. In this situation, the price paid may be far beyond the amount that any rational examination of the issues would otherwise suggest.

Business Acquisition Finance

Acquisition financing is the process of obtaining capital from an investor or financial institution for the purpose of acquiring another business.

Acquisitions, of course, typically involve the purchase of equity. To acquire another business, your business must purchase equity — usually a majority stake — in the target business. Acquisition financing will provide your business with the necessary cash or credit to facilitate this purchase and, thus, execute the acquisition.

How Acquisition Financing Works

Unless you’ve used it in the past, you might be wondering how acquisition financing works. It’s similar to other forms of business financing; the only real difference is that acquisition financing is designed specifically to facilitate the acquisition of another business. You must use the cash or credit to purchase equity in the target business.

While acquisition financing is characterized by its purpose — to acquire another business — it’s available in different types. There are acquisition financing loans, for instance. An acquisition financing loan is a debt-based financing vehicle that’s used for acquisitions. You can obtain an acquisition loan from a bank or alternative lender. With this loan, you can facilitate the acquisition of another business.

There are also acquisition financing lines of credit. An acquisition line of credit is another type of debt-based financing vehicle. The difference is that it allows you to freely draw money from the line of credit, whereas a loan does not. Acquisitions often have unexpected expenses.

With an acquisition line of credit, you’ll have an easier time covering the costs of any unexpected expenses. You can draw money from the line of credit while paying it back at any time. An acquisition financing loan, on the other hand, doesn’t give you this option.