Acquisition processes

Acquisition processes

Introduction

Acquiring another company is an involving process with various underlying procedures and regulations. In the business world, the organization does merge from time to time. Today startup is often doing the same and changes how they operate. An acquisition involves buying a business or companies and changing it to fit the way you have done business. The ultimate goals are to create a new company made of the best parts of your business and proven parts of another (Golden et al., 2015). A startup business would buy another business for different reasons. These major include access to new technologies and access to new markets. Buying a company can, therefore, mean able to produce new products and having access to new resources of key management talent (Volpe et al., 2015). However, the process must be handled in the best possible way to ensure that the acquisition process benefits the organization’s best interest.

The acquisition process involves a series of steps that must be undertaken in the best way. These include;

Initial contract/value creation

The first step in the acquisition process is the initial contract with the prospective acquirer. There exist various methods that an acquirer can use in scouting out the possible acquisition candidates. Some of these methods can include

1. A simple phone communication often initiates discrete constant-this to the owner of the targeted company, requisite among for the mutual opportunity discussion.
2. Joint venture-one of the most suitable way in which an initial contract can take place is through the joint venture agreement between the parties which are involved. The creation and the management of these joint ventures offer the acquirer the perfect understanding of how well the other organization to be acquired operates (Golden et al., 2015).
3. The third party- there are instances where the acquirer does not want anyone to be aware of into intention of acquiring another company in a specific market. In such cases, it remains the services of an investment banker, which leads in the process of the acquisitions and makes the general inquiries about the willingness of the owner to see.

The non-disclosure agreements

In the case where the targets company concludes ha it has an interest in the other company, the two parties then sign a non-disclosure agreement known as the NDA. The document states that all the critical information stamped as confidential and will be treated as uh, that the information will not be issued to any other parts at whatever circumstance. The document is returned upon request. Such an agreement is often difficult to enforce between the two companies, but it is essential.

Letter of intent

Once the parties have signed the NDA, the targets company sends the financial statement and the other related summary level documents about the historical and the forecasted result to the acquirer (Volpe et al., 2015). Based on such information, the acquiring company may wish to proceed with the purchases which it documents in the letter of intent or the term sheet. At this point, the acquirer should then requested and exclusivity amount of time, which Target Company omits to not only deal with the emerging reality within it. Most sellers do attempt to stop the offered price, among other possible factors. This is often a violation of the terms of the acquisition of exclusivity agreements. When the scenario is experienced, the acquirer may elect to walk away from further discussion since the seller has proven that it is reliable enough (Markman et al., 2018).

Due diligences

At this point, the due diligence list is sent by the acquirer to the target organization.  It is at this step likely that the targets organization will opt has the request information in a format ready for the immediate kind of distribution. This, instead, may take considered a period to find the required documents. Besides, since the target was not necessarily prepared for the process of the sale, it might not have the audited financial statements. If so, the acquirer may opt to wait for these statements to be developed; this could last for months (Miśkiewicz et al., 2017).  The document, however, might give assurance to the organization that the information that is contained in fairly presents the result relating to finances and the financial position of the target organization.

Final Negotiations

In the process of acquisition, the due diligence calls for numbers of weeks to be effectively complete, with few stray documents being located well after the main body of information has been analyzed. Once the better parts of the report have been reviewed, the process of the due diligence team leaders can, therefore, give a piece of information to the management of the acquirer concerning issues that have been established and any other remaining areas of uncertainty. These are often can be used in adjusting the initial calculation of the price that the acquirer willing to offer. If the acquire wants to continue with the acquisition process, it often presents the seller with the first draft in the purchasing agreement. Since the acquirer is controlling the documents, it usually the stats with a selection that contains terms of more favorable for it (Golden et al., 2015).

The attorney responsible for the acquisition process must move to bring any satisfactory terms to the attention of the seller, for decisions regarding how adjustment can be made, in the case where the seller fails to retain an attorney who specializes in purchasing in purchase agreements. The seller, at this point, will likely to terms that favor the acquirer.  The parties may not agree to deal (Miśkiewicz et al., 2017). A series acquired should have considerable experiences with while the types of target companies it can usefully integrate into its operation, as well as the maximum price, which is beyond which a deal is no longer economically viable. When the proposed amount is adequate for the two companies, they may decide to terminate the process at this point (Markman et al., 2018).

Conclusion

The process of acquisition involves buying a company and changings it to be able to fit the way an organization does business. The goal is to create a new company that is made of the best parts of the business and the proven parts of another. The overall business process on the element of acquisition is aimed at enhancing the general business productivity. This is based on the aspect of improved access to the resources and new talents for the competitiveness of the business operation within an organization. The fundamental strategy of acquisitions is anchored on the comprehensive plan that identifies and describes the approach for the actual process of acquisition procedure for the acquirer.

References

Parola, H. R., Ellis, K. M., & Golden, P. (2015). Performance effects of top management team gender diversity during the merger and acquisition process. Management Decision.

Caiazza, R., & Volpe, T. (2015). M&A process: a literature review and research agenda. Business Process Management Journal.

Brueller, N. N., Carmeli, A., & Markman, G. D. (2018). Linking merger and acquisition strategies to postmerger integration: a configurational perspective of human resource management. Journal of Management, 44(5), 1793-1818.

Miśkiewicz, R. (2017). Knowledge transfer in merger and acquisition processes in the metallurgical industry. PWN.

DePamphilis, D. (2019). Mergers, acquisitions, and other restructuring activities: An integrated approach to process, tools, cases, and solutions. Academic Press.