***Advertisement: Ascent Partners 7 April 2010***

For Sale: Melbourne-based high quality commercial printer with an as new quality automated A2- 2 colour press, and multi colour GTOs. The business is long standing and highly reputable, has around $750,000 of turnover (quality direct customers), on line ordering and warehousing – selling for $495,000 including machinery … read more.

Tip 3 / 5 Tips to consider when you’re planning to grow by acquisition

Tip 3 – Research the market. OK, so you’ve worked out what sort of business you wish to buy (type, turnover / employee size, transaction size, geography, transaction structure, how financially sound they are, what synergies you want them to bring, etc), and you have your finance in place, now is the time to research the market.

Tip 3 – Research the market. OK, so you’ve worked out what sort of business you wish to buy (type, turnover / employee size, transaction size, geography, transaction structure, how financially sound they are, what synergies you want them to bring, etc), and you have your finance plan in place, now is the time to research the market

The first thing you need to consider is whether you are an opportunistic buyer – one that is ready once an opportunity presents itself, or if you want to be a proactive buyer, the one that initiates the contact

An opportunistic buyer needs to let it be known that they are in the market to make an acquisition. There are a variety of ways to do this, which course you set to follow is really dictated by how confidential you want to make your interest. 

Some of the ways you could let the market know are:

•    Notify brokers in the industry of what you are looking for (not all businesses are listed on their web sites), and they may have had discussions with potential vendors

•    Notify your networks and contacts, such as paper suppliers, machinery suppliers, industry associations etc.

Of course you can just sit by and watch the trade journals and broker’s sites, or wait for someone to knock on your door, but really if you adopt this approach you’re probably not that serious about making it happen. 

 A more proactive way of getting to potential vendors is to start by doing your our own research, or to engage someone to do the research on your behalf. Some sources of information, apart from those listed above, are:

•    Industry data bases

•    Business lists – i.e. if you’re looking to purchase a designer, then lists can be purchased with contact names, addresses, number of employees etc.

•    Google / Yellow Pages

•    Internal sources

The proactive approach can also include advertising your interest in trade journals, perhaps direct mailing know suspected targets, or even via a direct approach, such as a phone call, to potential vendors

It could also include you engaging someone to act on your behalf. External assistance obviously come at a cost, but may bring with them a wealth of experience in business transactions. You could of course have the skills internally to do the research, initial contact, transaction structure, negotiation and post deal integration. If you have not done an acquisition before, it makes sense to look at getting external assistance or at least researching how it is best done. 

The famous military quote that “time spent in reconnaissance is time rarely wasted” certainly holds true in the search for acquisition targets. The more background information you can gain on “the target” the better. This could include but is not limited to, how many employees they have, the age of the proprietor, their equipment, their management, niches etc.

The approach you, or your external person makes, to potential vendors is of course is very important. In my experience it’s best not to pick up the phone and ask if they are for sale, as the answer will be invariably “no”, or “everything is available for a price”.

“The approach“ is the subject of tip #4 next week.  

 Ascent Partners offers business appraisals, and the subsequent development of options as industry consultants.  Contact Richard Rasmussen on 0402 021 101, or visit our web site at www.ascentpartners.com.au