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News – 10.04.24
Form PF: Are you up to speed with the latest developments?
Through this insight we will bring to your attention the main changes in a bitesize manner so that you can stay abreast of the requirements as they may apply to your firm. … Read more
Insight – 16.04.24
US and UK tax on carried interest
US and UK tax on carried interest … Read more
Upcoming event – 29.04.24
Governance code updates and advice for Further Education colleges from Buzzacott and the ESFA
Join Buzzacott and the ESFA for a governance update for further education colleges … Read more
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Bolt-on acquisitions can be an effective way to rapidly unlock a new geography. This could be small scale, for example an architecture firm based in the south of England looking to quickly expand into a Northern city using an acquisition to ensure it has an instant client base and strong local experience.
At the other end of the scale, it could be used to gain access to a new country or continent. Just recently I worked with a European based security company that was looking to make a UK acquisition to do just that. Brexit may make this an even more attractive proposition if the agreement reached doesn’t allow for the level of access to the European market that UK-based companies are looking for (or vice versa).
Another benefit of bolt-on acquisitions is the ability to add a complimentary specialism to your offering to make it a more attractive overall proposition. Rather than taking the risk of building up a new specialism from scratch in an uncertain economic environment, it is now more appealing than ever to take a shortcut with an acquisition.
I recently worked with a software developer who was looking to add software integration and project management specialisms to present a more complete offering to clients. Wisely, when looking for a bolt-on acquisition, they were targeting established businesses with a proven track record in delivering such services.
Sometimes an acquirer will simply look to make an acquisition to strengthen an existing service line, whether this be through increasing client book, manpower or general market share. Particularly in the current environment, smaller competitors may be more inclined to consider joining a larger firm to help them avoid running into financial difficulties.
With all of these benefits and opportunities for growth, it’s easy to want to jump straight in. But don’t forget to do your due diligence.
As is the case with any acquisition, there will always be risks involved. Thorough due diligence should be carried out to help reduce these risks and improve your overall understanding of a target business. Businesses of a smaller size can often have poor quality accounting records, so it may be necessary for your due diligence provider to take a more in depth role, working with the target to extract the information required.
In one extreme example we provided due diligence services for the acquisition of a US target that had no accounting records other than bank statements. We had to extract data from these statements to build a set of accounts on the cash basis, and then use these accounts to perform our diligence work. These services provided assurance to our client and helped to reduce the risks associated with the transaction, which is vital in the current climate.
If you’re considering a bolt-on acquisition, or if you have any questions about the above, please get in touch. Our Corporate Finance team provide due diligence services across a wide array of sectors. We also have a network of venture capitals and private equity firms that we can connect you with if you’re looking for funding to grow your business.
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