Acquisitions and changes of ownership

Read our tips for a successful corporate acquisition.

Corporate acquisitions can be made for many different reasons. Some will want to sell their business when retiring. For others, corporate acquisitions can be an integral part of growth strategy. 

A corporate acquisition is an arrangement where a company buys another company’s shares or assets. 

In an asset acquisition, a company sells all or part of its business assets, and the buyer pays the acquisition price to the seller company. As part of the transaction, the company’s customers and contractual relationships are often transferred to the buyer.

In an equity acquisition, the company’s shareholders sell the shares entitling ownership of the company to the buyer. Through the transaction, all rights and responsibilities attached to the ownership of shares, such as debts and liabilities, are transferred to the buyer. 

1. Begin preparing for the sale well in advance 

A corporate acquisition begins by preparing the business for sale. Before going through with the sale, the business must be in good overall order and not dependent on the current owner.

Before selling, it is worth going through the balance sheet and removing anything that is not the company’s core business. Ensure that the company’s contracts, processes, products and financial management are carefully documented and archived. 

We also recommend writing a sales brochure that contains basic information about the business, its organisation, the market situation, products and most important customers and suppliers. 

 

2. Acquiring an existing company

Buying an established business through an acquisition is one way of becoming a business owner. By buying an existing business, you also get access to an established business idea, customer base and company reputation. Buying a business is also a potential way to expand your existing company’s operations. 

You should familiarise yourself with all aspects of the company you are buying, including financial statements, assets and competitive landscape, as well as future outlook and plans.  

The buyer’s familiarity with the sector and their experience as an entrepreneur or employee help make the acquisition successful. 

 

Measuring the value of a business

Before the acquisition, it is important that the value of the business is measured accurately. This can be done in one of two ways. 

The intrinsic value of a business is based on how much a new owner can earn from it in the medium term. To calculate the intrinsic value of your business, you need to have a realistic forecast of profits over, for example, the next five years.

The net asset value of the business, which is the value of its assets minus the value of its liabilities, is considered the minimum price for your business. 

The value of your business is not the same as its price at the time of sale. The price is a figure agreed between the seller and the buyer, and it can be higher or lower than the value of the business.

 

4. Intergenerational transfer of a business

A common form of corporate acquisition is an intergenerational transfer of a business. Intergenerational transfer of a business refers to a situation where a company’s ownership is transferred to another family member or close relative.

Intergenerational transfer is often a process that takes years and involves aspects such as taxation, corporate law and inheritance law. You should familiarise yourself with these carefully as under certain circumstances, you may be eligible for tax breaks on the transfer. Intergenerational transfers also usually involve smaller selling prices and the donation of assets to a successor.

 

5. Financing a corporate acquisition 

The size of the corporate acquisition plays a major role in choosing the financing solution. Small acquisitions are usually financed with the buyer's funds and a bank loan. The larger the acquisition and the more complicated the arrangements, the more financing methods and financiers are needed. 

Our experts will help you decide on the best solution for your situation.

 

6. After the acquisition

After finalising the acquisition, make sure that your banking and insurance services are appropriate in your new situation. 

For example, the seller of a business might consider investing the income from the sale, whilst the buyer may need to update his/her payment transfer, cash management and insurance services.