Timing and Funding the Acquisition

You may or may not have input on your client’s timing when it comes to expanding. However, it is important to know what they may, or possibly should, be thinking. Is the client seeking to expand because it wants to find ways to generate more profit? This is likely the case. Having more employees usually means more people to do services or the work to generate revenue. Having more products gives a business options to create more revenue as well.

Timing

Is this a good time for the client to be thinking about making a purchase? Purchasing another company is going to be disruptive. Finding a company to purchase takes time, as does the due diligence that has to be performed before moving forward (more on this later). Financial and human resources will have to be expended in order to make such a move. Does the owner or whoever is managing the company have the time to embark on a purchase?

Maybe there is no choice as to timing. 💡Think of reasons why a business may have no flexibility as to the timing and how that may impact other things.

If the business is doing well, that could be a signal that it is a good time to expand. The client should review its numbers to see if it is on a sustainable path to growth and consider these financial data points:

• Are its products or services increasingly in demand?
• Are expenses under control and have they been consistent over the past few years? Similarly, are they projected to still be under control?
• Are profits strong and have they been over the past few years?

Funding

Funding the purchase is arguably one of the most important considerations. Does the client have money to make a purchase? If the answer is yes, did the client consider if using current money to fund a purchase may possibly strap it in case of an emergency? You certainly do not want to constrain cash flows to a level that will harm the business.

What about getting a loan? Is the proposed acquisition target large enough that it necessitates getting a loan? If so, look to banks and online lenders.

If the deal is large enough, the client may go to an investor. It is important to remember that investors can loan money but quite often they want a stake in the business. How much ownership and/or control are the owners willing to part with?