Acquisition Process consisting of the following steps:
Manage the Pre-acquisition phase
This will enable the acquiring company to understand well its strengths and weaknesses,and deepen the acquirer’s insights into the structure of its industry. It will also help in identifying ways and means of enhancing the value of the acquiring firm,so that the firm can minimize the chances of becoming a potential acquisition candidate itself.
Screening criteria that make sense for the acquiring company’s perspective need to be used. For example,an acquirer may eliminate companies that are:
- Too large
- Too small
- Engaged in a totally unrelated activity
- Commanding a high price-earnings multiple or
Evaluate the remaining candidates
Each of them should be examined thoroughly. A comprehensive evaluation must cover in great detail the following aspects: operations, plant facilities, distribution network,sales and finance. Special attention should be paid to the quality of management. Experienced,competent and dedicated management is a scarce resources.
Determine the mode of acquisition
The choice of the mode of acquisition is guided by the regulations governing them, the time frame the acquirer has in mind, the resources the acquirer wishes to deploy,the degree of control the acquirer wants to exercise,and the extent to which the acquirer is willing to assume contingent and hidden liabilities.
Negotiate and consummate to deal
For successful negotiation, the acquiring firm should know how valuable the acquisition candidate is to the firm, to the present owner,and to other potential acquirers. While negotiating the deal,an acquirer would do well to remember the following advice of Copeland,“your objective should be to pay one dollar more than the value to the next highest bidder, and an amount that is less than the value of you”. This implies that the acquiring firm should identify not only the synergies that it would derive but also what other acquirers may obtain.
Manage the post-acquisition integration
Generally after the acquisition, the new controlling group tends to be much more ambitious and is inclined to assume a higher degree of risk. It seeks to:
- Quicken the pace of action in an otherwise settled organisation.
- Encourage a proactive,rather than a reactive, stance towards external developments, and
- Emphasize achievement over adherence to organizational procedures.