Although acquisitions are a widespread institution in large companies, this model is not very popular with small and medium-sized enterprises, it is however worthy of consideration.
There are various types of transactions for the acquisition of companies abroad, as each of them aims to provide the most efficient tools to conclude sound and fair agreements, according to their specific needs. Below we will provide you with a set of cross-cutting observations and recommendations to keep in mind when making an acquisition:
- Always do a thorough due diligence of the deal. Preliminary investigations are essential for the proper conduct of the business model, since the company of interest will potentially be part, after the acquisition, of the company reality. The target company (object of acquisition) will have to be examined from all the profiles, that is: financial, fiscal, organizational, market positioning, perspectives of commercial development, legal disputes (potential or in progress). A sight unseen purchase would, in most cases, be detrimental to the purchasing company, as the target company could conceal some crucial and compromising details, such as low profitability, low growth prospects or severe legal disputes. The results of the investigation could preclude or discourage the conclusion of the deal or provide the negotiating power to negotiate better terms;
- During the conclusion of the agreement it is necessary to take the initiative in the negotiations and in the drafting, since these are decisive elements of the acquisition plan. It will also be vital to be precise in defining the declarations and guarantees made by the seller. These points imply the need to be assisted by experienced lawyers and accountants at every stage of the negotiations for the definition of the agreement;
- It is appropriate to be fully aware of the regulatory landscape in the State of reference, since some transactions may give rise to reporting obligations to the competition authority and might even be compromised by the applicable law. It is therefore appropriate to investigate in advance national (and supra-national legislation if the transaction takes place within the borders of the European Community) in order to verify the existence of any reporting obligations and/or acquisition bans.