Business Basics: Business Acquisitions

 acquisition

 

In the world of business, when a large merger or acquisition occurs it is widely reported on. However, these deals
are far more common with small to medium businesses than larger corporate companies.

Are you small- to medium-business in New Zealand that's planning on selling or investing in another business? Talk with the friendly and professional team at Engine Room Chartered Accountants in Tauranga and Pukekohe today on 0800 236 446.

What is a Business Acquisition?

A business acquisition takes place when a buying company purchases more than 50% of another company's shares in order to take control of that business. Typically, the buying company (known as the acquiring company) will purchase the target company's assets and stock which allows the acquiring company to make decisions regarding newly acquired assets without the selling company's shareholders.

 

What Are the Benefits of Making an Acquisition?

Acquiring a new company may seem appealing due to its instant growth benefits but growth by acquisition is not without its risks. Acquisitions can be perceived as being quite an aggressive tactic and this may not sit well with current employees, management and other key stakeholders in the selling company. Cultures may clash, partnerships between the selling company and other vital companies may deteriorate, key personnel may leave out of protest, and costs may increase. It is essential that the selling company is open and transparent with its employees regarding the acquisition plans and of course it is vitally important that their financial advisors and accountants are informed about the decision.

Are you a small- or medium-sized business thinking of going through the acquisition process? You should understand the risks and fully understand if acquisition is right for your company. Talk with the friendly and experienced team at Engine Room Chartered Accountants in Tauranga and Pukekohe on 0800 236 446.

 

What is the Difference Between an Acquisition & a Merger?

An acquisition and a merger are two very different situations but are often incorrectly used to mean the joining of two companies.

Businesses understand that the term "acquisition" generally carries more negative connotations to the term "merger" and, as such, companies use the term "merger" even when the situation is clearly an acquisition.

In short, in an acquisition (also referred to as a takeover) a new company does not emerge. The selling company is consumed by the acquiring company and ceases to exist.

However, in a merger, two separate companies join forces to make a new company. A new management structure is formed, and often a new company name – for example when Carter Holt merged with Alex Harvey Industries the became Carter Holt Harvey.

Mergers do not require cash to complete but they dilute each company's power. This means that merger deals don't take place frequently and are relatively uncommon. An acquisition requires large amounts of cash and the acquiring company's control is absolute.

Considering a merger or an acquisition? Talk with the financial experts today at Engine Room Chartered Accountants in Tauranga and Pukekohe on 0800 236 446.

 

Selling Your Business 

Business owners can plan to sell their company at any point in the company's life — from the point of launch or years down the track — selling the business is an exit strategy that most business owners should take into consideration.

However, in any circumstance it is essential that business owners seek the professional and unbiased advice of finance professionals such as accountants (like Engine Room) or businesses advisors.

If you are looking to sell your business it is important to ensure that your business is in the best possible shape in order to maximise your sale price. The selling company's finances should be robust and profitable and reflect the asking price.

To ensure your finances are looking their best you can sell any assets your business doesn't use, cease investing in long-term projects, and by producing a realistic financial forecast.

Getting your business ready to sell is a process that should be started sooner rather than later – it doesn’t mean you need to sell immediately but if your business is ready and unforeseen circumstances force an early sale it enables you to exit the business quicker and at a better price.

If you don’t have an exit strategy – call us now to see if you qualify for a free business health check (valued at $2500)

 

Tauranga & Pukekohe Chartered Accountants 

At Engine Room Chartered Accountants we are a team of friendly and experienced finance professionals that believe that small- and medium-sized businesses are the backbone of the New Zealand economy. At Engine Room our goal is to see SMEs compete at their highest level by taking a more holistic view when it comes to our client's finances.

We aim to streamline your business process and increase efficiency, we do this by keeping up-to-date with the latest cloud-based software and taking the time to further understand you and your business.

If you want to improve the one in which you do business, contact us at Engine Room Chartered Accountants on 0800 236 446 today for a no obligation chat.

Are you planning on going through a merge or an acquisition? Visit our Tauranga office on Grey Street or our Pukekohe office on King Street and talk to us today to ensure you are making the correct business decision.