MHA | The five key steps to a successful business acquisition

The five key steps to a successful business acquisition

Posted on: May 5th 2022 · read

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With successful businesses with strong balance sheets continuing to look towards further growth, we outline below the key steps to a successful business acquisition and explain how MHA’s corporate finance experts can add real value to the process.

Identifying and approaching target businesses

If you initially choose the wrong targets or approach the right ones in an ‘inappropriate’ manner, your whole strategy can hit the rocks very early in the process. Engaging experienced corporate finance advisers from the outset to help identify the right targets and to make the first approach. Prospective vendors want comfort that your initial approach is serious and involving us from the outset adds genuine credibility to your strategy.

Valuing a prospective target

We will look not only at the asset base of the target business but also its potential to generate cash. Valuing a business based purely on its net asset value does not necessarily produce a ‘fair market value’ if the business is profitable.

So, an equity valuation based on a multiple of sustainable profit, alongside net cash/debt and normalised working capital adjustments, is normally more appropriate. Deciding the level of sustainable profit, an appropriate profit multiple, net cash/debt and what constitutes normalised working capital all require M&A judgement and expertise.


Finding the right targets and valuing them correctly gets you so far. How do you ensure there is a funder out there prepared to back you financially? What do funders want to see in order to make a positive investment decision? We are well positioned to advise you in this area too. There are a number of ways to finance acquisitions: conventional high street bank debt, private equity, venture capital, business angels, mezzanine funding, asset-backed lending and structured finance, to name but a few.

We will assist you to prepare a 3-5 year funding model which outlines the key parameters of the acquisition for funders and we will then introduce you to a wide range of financiers, not just the high street ones, working closely with you to get the right deal and funding structure in place and at a competitive rate.

Heads of terms

Agreeing a detailed outline of the deal with the vendors can be time consuming and costly, even when it is dealt with in a focused manner from the outset. There are conflicting aims at this stage of the process, so trying to muddle through by ‘parking’ potential deal breaker issues till later is not advised.

We will work closely with you to ensure that all key issues are considered, addressed and clarified so that the agreed heads of terms are genuinely deliverable.

Due diligence and beyond

Once the heads of terms have been signed, it is then time to get a corporate lawyer on board to work alongside us on the due diligence and detailed transaction documents. We are well placed to introduced legal advisers who are well versed in transactions of this nature and will happily assist in choosing which law firm is the right one for you. But that’s a topic for another time……….

Find out more

If there are any topics raised in this Knowledge Post that you would like to talk to us more about, please do get in touch.

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