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BUY TO BUILD 10 steps to acquisition success

Contents EXECUTIVE SUMMARY: RISKS AND REWARDS In focus: accelerating scale

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STEP 2: FUND THE DEAL In focus: buy and build investment In focus: debt vs equity

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STEP 3: FINDING AN ACQUISITION In focus: positive disruption In focus: choosing the right acquisition

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STEP 6: NEGOTIATE THE DEAL In focus: negotiation checklist

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STEP 7: DUE DILIGENCE In focus: learn from your peers

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STEP 9: MANAGING INTEGRATION AND BEYOND In focus: integrating culture overseas In focus: preparing for day one

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STEP 10: PREPARING FOR EXIT In focus: M&A market

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SUPPORTING PARTNERS About Avondale About Buzzacott

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About The Supper Club


Disclaimer: This publication has been prepared for the exclusive use and benefit of the members of The Supper Club and other contacts of The Supper Club and is for information purposes only. Unless we provide express prior written consent, no part of this report should be reproduced, distributed, or communicated to any third party. You must not rely on the information in this publication as an alternative to advice from an appropriately qualified professional. In no event shall The Supper Club or any of those contributing to this publication be liable for any special, direct, indirect, consequential, or incidental damages or any damages whatsoever, whether in an action of contract, negligence, or other tort, arising out of or in connection with the contents of this publication.


Contributors Thank you to the members and partners of The Supper Club who have shared their insight and expertise to help scaleup founders make better acquisition decisions

Alex Evans Pogramme Director The Supper Club

Grant Bergman Corporate Finance Director finnCap Private

Charlie Mowat Founder & CEO The Clean Space

Kevin Uphill Founder & Chairman Avondale

Claudia Dreier-Poepperl Founder & CEO Claclac Ltd

Mark Cornwell CEO HPS Group

Clive Nation CEO Cennox

Matt Katz Corporate Finance Partner Buzzacott

Ed Persse Partner Osborne Clarke

Mike Lander Co-founder ENSOUL

Emma Jane Packe Managing Director The Supper Club

Patrick Eve CEO ZigZag Global


BUYERS BE AWARE Acquisitions can help you accelerate scale and boost valuation but it’s vital that you design and plan your strategy around clear objectives, writes Supper Club MD Emma Jane Packe. Whether you’re acquiring for scale or to sell at a higher value, you need to prepare your business for the best outcome. A good acquisition strategy is not only attractive to a future buyer, but it will help you acquire the right businesses to support growth. Members bemoan pitfalls in peer learning events on this popular topic, and frequently recommend getting professional advice on everything from funding an acquisition to structuring for a future exit. Expert advisors warn that around 70% of acquisitions fail to complete, and those that do could take more time than you planned for, so you need to be clear why you’re making an acquisition and how to make it work. WHY TO ACQUIRE Acquisitions can reduce risk, by diversifying products and services, and reduce marketing and development costs. It can provide new distribution channels, buying power, cross-selling opportunities, and talent with premium skills. It can give you an edge over competitors, and help you grow into new markets. But is it the best and only way to achieve your objective? Some acquire businesses to gain core skills that it would take too long to develop and train internally. To avoid the cost, hassle and cultural disruption of an acquisition, you could just recruit them. Acquisitions should help you to scale faster. For example, expanding your client base quicker than your salesforce would, or taking over a competitor to increase market share. Some members have scaled quickly by acquiring poorly run businesses and using their management expertise to make them more profitably. A badly run business may present you with a great opportunity for cost and efficiency savings; but do you have the resources, process, and experience to turn it around? A good acquisition story may be attractive to a future buyer, but they will also want to see strong organic growth and proof of a well-run business.

So what are the golden rules of acquisition? How do you avoid brokering a deal that fails or, worse, buyer’s remorse? The short answer from members who have grown through acquisitions is to look for the red flags. Plan for the best but prepare for the worst, and do your due diligence. While product-based firms can be more predictable than people and service-based businesses, acquiring a company doesn’t guarantee client loyalty or protect it from changes in the market or the economy. But you can check if clients are on long-term contracts and if key relationships are with the founder - which may mean having to incentivise them to stay on as MD or sales director with an earn-out. A poorly run business will likely mean bad financial management. There may be complications from previous fundraising rounds, such as too many investors to manage, and complex ownership rights. As part of the due diligence process, accountants should check there are no outstanding tax liabilities, and your legal advisors should highlight any issues requiring warranties that the vendor will be personally liable for. HOW TO ACQUIRE This guide will take you through each step of the acquisition process, from finding and funding it to preparing your own business for scale or sale. Like all of our guides in The Supper Club Insights series, it combines technical advice from advisors recommended by members with practical tips and hard-learned lessons from high growth entrepreneurs. It brings to life our mission to inspire an entrepreneurial mindset in all leaders to help all founders make better decisions. Thank you to our supporting partners of this guide, Buzzacott and Avondale, for their expert advice; and to the members who have kindly shared their experiences, tips and tactics for successful acquisitions.


In focus: accelerating scale Charlie Mowat founded The Clean Space in 2003, a commercial cleaning company based on the principles of fair treatment for its staff rather than the exploitation often seen in the industry. It has since grown to £7.5m, servicing over 700 clients across the UK. Charlie shares what he has learned from ten acquisitions as part of his buy and build strategy: Why did you decide to scale through acquisition? Acquisitions mean we can grow much more quickly. It’s riskier but it’s quicker. We think we can run those businesses better, and make them more profitable and valuable. What have you learned from your acquisitions? The most important lessons are: never believe what the vendor tells you, always get proof, and never compromise on what you need to see to be sure they’re telling you the truth. The other thing is never underestimate how disruptive it can be to do an acquisition, how much time it takes, how much cost is involved, and how much it disrupts your existing business. How have you defined and refined your acquisition process? I have a process driven approach almost like a sales and marketing model. I build a pipeline, bring the deals in and analyse them before passing them on to fulfilment. We have defined stages with clear objectives when finding acquisitions. The first stage is finding new people who might want to work with us. The second stage is to start a dialogue and keep them warm for when they are up for discussing a sale. The third stage is analysis and the fourth stage is heads of terms. Where have you used advisors and got most value from them? Advisors have been very useful. At the lower deal size, we only use legal advice and accountancy which is adequate. We have standard legal contracts, so we don’t always need legal advice if it’s small. We do use legal advice for larger deals and corporate finance advisors have proved valuable. How have you funded your acquisitions?

We got bank debt early on when we didn’t need it to build a track record of paying debt easily. We have used cash generation to acquire, borrowing when we needed it to build a buffer. I plan to use debt as far as I can but I’m aware that debt is cheap but unforgiving while equity is expensive but supportive. How have you ensured most value from your acquisitions after completing the deal? For integration to be successful, you need to make sure it’s fully resourced with strong leadership. Make sure you have enough resource for business as usual and integration to happen at the same time. The person heading up acquisitions needs to be more than a manager; they need to be a leader who can create and drive a clear plan, who can report on topline issues, and make great judgement calls. Someone who gets it done. We have someone dedicated to overseeing and executing acquisitions. You also need a strong process. We created an ops manual with a list of tasks which we add to and amend after each acquisition wash-up. It seemed like overkill at the start, but it ensures we stick to a process and learn. A big lesson was underestimating what the owner does and how active they are in the business. They can leave a big hole and you need to prepare for this. What have you done to prepare for a potential future exit? From an exit perspective, I think it’s best to have everything rolled in and integrated under one brand instead of creating a group model. It’s important to think about what the market wants to buy and that your acquisitions don’t deviate from that so you’re always well positioned.


STEP 1: PREPARE YOUR BUSINESS Consider both the cost and the sales synergies that come from an acquisition as well as the cultural changes and challenges. Once you decide to make acquisition part of your growth strategy, communicate that all through the business. Be clear on what you are looking for and why because your whole team can spot opportunities - and will be on the same page if they approach any targets. Find someone who can project manage acquisitions, who will become your Head of Acquisitions as you scale. They should help to ensure business as usual is unaffected by the acquisition, and the team has enough resource to manage integration at the same time. Advice from members for those embarking on this journey is to think about building an acquisition brand. Just as an employer brand is designed to attract and retain talent, an acquisition brand should help to keep the top performers in the acquired business. KISS, PUNCH OR ASSIMILATE? As Richard C. Morais in Forbes put it in his 2008 article Kiss and Punch, (former) WPP CEO Martin Sorrell urged his operating executives to ‘kiss and punch’. He first held each company vigorously accountable in quarterly budget meetings but then backed off and let each firm reach its benchmarks in its own particular way. One executive described Sorrell’s system as ‘corridors of freedom.’ With ad agencies like Ogilvy and JWT often battling for the same piece of business from their respective silos, the punch simply meant that each brand must fight its own corner. But is kissing and punching the best approach, or is it better to assimilate into a single brand? Charlie Mowat, founder of The Clean Space, believes in the latter. He has grown his cleaning business by making ten acquisitions over seven years; buying up businesses that either operated in different geographic markets or were already eating into his market share. His commitment to The Clean Space philosophy – on which he founded the business – made this choice

easy. All clients would be rebranded and trained to operate in The Clean Space way. Mark Cornwell takes a different view. His marketing agency, HPS, has built out its skill sets and capabilities across the marketing spectrum by buying smaller, specialist consultancies. But none are fully assimilated into the one business. Each retains a separate P&L but are encouraged to work together, referring, cross-selling and collaborating across disciplines to seize a larger slice of the marketing mix—and budget. “The decision to diversify really came as a result of looking at our business at the time. We were dependent for our revenue on one particular client. Although we built organic growth, it wasn’t enough to protect us from that over-reliance.” “We tripped over acquisition, really”, Mark adds. “An opportunity came. Once we’d made that acquisition, which was pretty much a smaller version of ourselves, we realised that we could also use it to diversify as well. We could take other businesses in our sector which offered a slightly different service to ours so we could build our service offering piece by piece - having a group philosophy rather than a single unit philosophy.” Letting go of his company name was one of the biggest struggles for Dan Scarfe. Upon being acquired by Columbia Capital on a buy and build strategy, Dot Net Solutions was subsumed into New Signature. Despite its clear benefit to the business – elevation to an internationally recognised brand, an expanded client base, and a greater capacity to scale – Dan admitted he was conflicted about letting go of a brand he had nurtured. “Ultimately, though, the UK operation retained its reputation and operational independence which quickly transposed into the New Signature UK brand. Inclusion as part of a bigger group which can out-big the smalls whilst out-smalling the bigs is now delivering clear benefits.” 


STEP 2: FUND THE DEAL The funding landscape for acquisitions is constantly evolving, with new debt and equity options emerging and a variety of platforms. Members value corporate finance advisors for their guidance on acquisition strategy and how to fund it. They will look at the combined EBIT of your business and the acquisition target and recommend debt or equity or a combination. A good financial director or NED should also be able to advise on how best to fund acquisitions. “Before considering equity for an acquisition, be aware that it could cost you a lot more over the lifetime, so ask yourself if it’s worth it and if there are other ways to achieve your acquisition objective,” warns Buzzacott’s Matt Katz. “It’s not unusual to pay 60-65% of the business upfront, so look for a healthy balance sheet as you could use the cash and assets to pay the vendor over 2 to 3 years as part of a deferred consideration. There may be tax advantages for the vendor, so check with your advisor.”

from 11-15% depending on the risk of the business. Boost & Co lends throughout Europe, while BMS Finance lends in UK and Ireland. Santander Growth Capital Loans are available to UK businesses only with a turnover of up to £25m, with 10% interest per year plus a 10% fee at the end. Tip: A Financial Director will be invaluable during the acquisition process to understand where the value is in the business and the quality of revenue.

Members and advisors recommend caution with cheap equity. With crowdfunding, valuations can be very high but it’s hard to get the same valuation when you go to raise more from the market and there is a higher risk of diluting the original investors. A lot of HNW individuals invest through Enterprise Investment Schemes (EIS) for the tax break and so can only own up to 30%. EIS and VCT (Venture Capital Trusts) tend to look for multiples of 5 to 7x ROI in 5 years. Advisors recommend looking at whether it’s tax driven or evergreen, as some will want their money out sooner.


New sources of debt finance include Caple, an online portal where you input your stats and forecasts for an unsecured loan. ESF Capital is a new lender to SMEs with secure loans between £100k and £5m over a period of up to 5 years. Other venture debt players include Boost & Co and BMS Finance which are funded by the British Business Bank, with loan interest

EQUITY There is now a broader spectrum of equity finance options, each with different terms, approaches and ways of adding value.

Chris Donnelly, founder of Verb Brands, has used long-term structured deferred consideration to acquire, raising capital from a bank or private lender for the first upfront payment. “We refinanced capital based on a larger business and then put in place longer cheaper debt finance,” he explains. “We used the additional profit from consolidating two businesses to facilitate the ongoing deferred consideration.”

Most banks look to lend £2m+ on 1.5-2X consolidated EBITDA. Bank lending has become more competitive for funding acquisitions as new players have emerged.

It’s always good to start a relationship with your bank by borrowing small amounts, proving your ability to repay, and build your credit rating (try to keep in line with any financial projections to prove your reliability).

Tip: A good trackrecord on buying and integrating businesses will impress lenders, investors and potential buyers.

Growth capital is becoming more patient, with investors offering longer timelines to take into account the stage of scale. Private equity will help to professionalise a business, bringing financial rigour to the board to ensure the accounting and reporting are clear for due diligence. They typically look for 3 to 4x ROI in 5 years. For bigger deals, consider an IPO – either offering public stock or going to the public debt market to get finance. Institutional investors are becoming a more popular option for funding multiple acquisitions. Bear in mind that this source of capital comes with more public scrutiny.


In focus: buy and build investment Clive Nation is CEO of Cennox, a banking automation and support services company that funded several acquisitions on its own before taking growth capital in 2012 when revenues were around £10m with approximately 50 staff. It’s now forecast to hit £80m. He shares insights on funding acquisition to scale: Why did you decide to take investment to fund acquisitions? We had reached the limit of our personal finances and wanted to significantly grow the business. We could not do this without giving up some equity. My senior executive team were all very experienced business people and we found that we could acquire other businesses and apply our principles to great effect. We wanted to grow our business and maximise profits from underperforming acquisitions.

It was the foot on the ladder we needed. In the past 6 years, we have grown significantly through acquisition and we are forecast to reach £80m in 2018 employing 750 staff. What piece of advice would you give to someone looking to accelerate scale through acquisition? Be sure to invest in great staff and be prepared to delegate as your business grows, but never take your eye off the ball. Paying close attention to the detail will ensure you succeed.

Convincing investors that we knew what we were doing. We did this by ensuring that we took good advice on the best way to present our numbers and forecasts.

“Have hard numbers and data, both for the companies you are acquiring, and to back your valuation for potential buyers. This will be invaluable for your own buying decisions and your credibility to potential buyers. “

What impact has this investment had on the business?

Kevin Uphill, Founder & Chairman, Avondale

What was the biggest challenge you faced securing PE?

Charlie Mowat, Founder, The Clean Space “Debt is cheap but unforgiving while equity is expensive but supportive.”


In focus: debt vs equity Grant Bergman, Corporate Finance Director with finnCap Private, shares insight on funding acquisitions based on his work with high growth entrepreneurs:

How do your scaleup clients tend to fund acquisitions? This is a mixed bag and depends on the type of business and the size of the target. A number of our more recent client fundraisings for acquisition programs have had an appetite for funding these with debt and/ or paper where possible. This tends to be less dilutionary and can also be a faster process than raising equity. The caveat on this is that the cash flows need to be able to sustain the associated debt and for a scale up this is not always appropriate. Also, it means that any cash flows go towards paying back debt rather than into growing the business in many cases. Therefore, acquisitions are often done using existing cash and equity raises. What are the longer-term implications of debt and equity? If the longer-term aspiration is IPO, then this needs to be taken account of as the

public markets will not support a huge amount of debt (typically a max of about 1 x EBITDA). In these circumstances an equity and cash deal may be more appropriate. We are certainly seeing more focus on longer-term delivery and earn-out structures that allow the target to deliver to its initial promises. Are there any other advantages to debt or equity for founders looking to acquire? Debt can mean less dilution overall, but locking it in may mean personal guarantees or other forms of security being required from the debt provider. Equity means that the seller is incentivised to deliver higher value in the long-term. An important factor to note here though is that if cash is required from external parties then it can be a lengthy process – so owners need to feel comfortable with keeping the target on the hook for long enough to allow them to raise.


STEP 3: FINDING AN ACQUISITION Be clear on your ultimate objective so you know what to acquire and how to gain most value. Before you start looking for acquisitions, think about what you can bring to a business and what you’d like to get back. List what’s important to you, look at your motivations and what you want to achieve. And consider your ability to achieve it. What kind of acquisition will give you the chance to put your skills and experience to good use? Do you have the competencies in your team to do the deal and project manage an acquisition? Do you have the capital to acquire, and can you raise it? What level of profit will make it worth the hard work? This brings you to the investment thesis that you should test any target acquisitions against. This should be informed by your growth strategy and may include: size, geography, product /service portfolio, access to markets, management or staffing team, technical knowledge and IP. Good acquisition targets will be doing a lot of things right and the broken areas are your upside - but due diligence is vital in determining whether you can improve it. “To minimise disruption and maximise cash flow, make sure that the companies you acquire are already self-sufficient,” advises Kevin Uphill, chairman of Avondale M&A. “A strong management team or key personnel should be in place so that productivity is minimally affected by an acquisition.” Once you’re clear on what you need to find, you can begin the hunt. Once an

Tip: Popular sources to find acquisition targets include mergerconnect. or ukbusinessesforsale. com and goldsmithsgroup. send out updates on businesses for sale.

Tip: Make sure you buy a business you understand for your first acquisition – it’s hard enough without having to learn about a new kind of business at the same time.

opportunity is in the public domain, it’s much harder to negotiate a great deal; so try to find off-market acquisitions first through personal networks before exploring published lists of companies that have a ‘for sale’ sign on them. Members have used a range of sources but most start with existing business relationships. Many acquisitions come from customers, suppliers or direct competitors. Many members have engaged corporate finance advisors to help in finding targets, giving them a hit list of potential companies or industries to work through. While advisors can help with approaches, members often prefer the personal touch. This approach might help you get under the skin of the vendor to find red flags or obstacles to acquiring the business. For example, how fundamental is the founder? Advisors can also help you to stay focused on your own potential buyer, and keep you informed about the market. “It’s important to have a good understanding of the drivers of acquisitions in your industry,” adds Uphill. “Keeping informed will help you stay one step ahead and comprehend the motivations behind buying decisions. Value can be relative, depending on the buyer, and this is where research is key to finding and piquing the interest of the acquirer who will place maximum value on your business, which can only benefit your sale.”

In focus: positive disruption Consider the future demands of customers when making strategic acquisitions “Think of the cornerstones of strategic acquisition in context of positive disruption - creating an ‘ahead of competitors’ offering which leads to customers changing their buying patterns,” says Avondale’s Kevin Uphill. If customer led market drivers are core to creating long term sustainability, then positive disruption should be the keystone factor in choosing the right acquisitions.” “Not to dismiss the other corners, but

synergy tends to be cross selling of today’s products. What if the customer wants tomorrows product now? Economies of scale are a one off and lead to diminishing returns. And shareholder value is great on paper if the shares boost is realised; but, ultimately, if customers start to turn the other way this will diminish the return as well.” Positive disruption is the driving force for many potential buyers.


In focus: choosing the right acquisition Matt Katz has advised many members of The Supper Club on their acquisition strategies as head of Corporate Finance at Buzzacott. He shares advice on acquiring the right business: There are three good rules that I always follow and advise clients on when deciding whether a business is worth acquiring. The first is trust, the second is synergies, and the third is quality of earnings. • Trust: Pick businesses which are owned and managed by strong, sensible and trustworthy individuals. If you focus on understanding the motives of the vendor and what they are really looking for from a transaction, the relationship you will create by doing this will make for a successful acquisition. • Identify the synergies: These are the areas where you can really maximize your value. You need to be able to recognise what your upside is from doing the transaction. Buy what you know and understand; you will find it far easier to maximize the synergies and minimize the risk if you have a clear understanding of the business and market it operates in. • Quality of earnings: Ensure the business has good, solid recurring revenue streams or a strong, diverse client base. If not, steer clear or, worst case, have a clear plan to rectify this and make sure that you don’t overpay. There are three red flags that I always look for that suggest a business shouldn’t

be acquired. These are: approach to the negotiation, information flow, and tax. • Approach to the negotiation: The initial conversations with a prospective vendor, and their behaviour, often sets the whole tone for the transaction that follows. Therefore, those first impressions are really important and a really strong indicator to me as to whether you’re looking at the right business and trying to make a transaction with the right person. If you have got off to a difficult start it usually just gets harder. • Quality of information flow: If the vendor is able to promptly provide good quality information it implies that the management are well organised and have a strong handle on the business. Clear and current information is easier to rely upon when deciding whether it is a robust and reliable business to buy. If you or your advisors can’t see that, you have to think really carefully about whether this is the right target to be buying. • Tax: Be wary of businesses that have tried to minimize their tax bills. Whether through the use of consultants over employees, or through overzealous share schemes, the penalties and costs that can arise as a result of these are often material and, on more than one occasion, have been known to derail a transaction.  



STEP 4: MAKE THE INITIAL APPROACH How you approach the seller, and how they respond, will set the tone for ongoing negotiations. It’s an emotional experience for any owner when someone offers to buy their business. Members and partners recommend trying to get under their skin, understand their motivations, and use language that resonates with them. You may need to sell them your dream while reassuring them that you will act as a guardian for their legacy.

Tip: Be discreet the owner may not want staff to know they are selling, but be thorough and record key findings.

A great way to support any approach is to bring your acquisition brand to life when they check you out. Some members have created a private webpage outlining their acquisition strategy and how it aligns with their values - with testimonials from previous acquisitions to reassure owners that their business will be stronger and their staff and clients will be treated with respect.

Tip: Approach the founder about a potential partnership and as it progresses start to introduce the idea of an acquisition so you’re on the front foot.

Some members warn that it’s a difficult balancing act of communicating your vision without giving away your growth strategy - particularly if you are looking to acquire competitors. If you identify where they can grow, and where they’ve missed a trick in various markets, they could get a new lease of life and do it themselves. Discretion is important with any approach, and members have used a range of tactics, from Inmail on LinkedIn to direct mail. This latter option has proved successful, with a letter posted to the founder’s home to arrive on a Saturday when they are most likely to read it (you can find details on Duedil or Companies House Beta). “It’s a nice, nonintrusive introduction,” explains Charlie Mowat, “particularly for those who want to sell but simply don’t know how.”

There is some debate about whether to approach personally or use advisors, and there are pros and cons with each. Getting advisors on-board early will show credibility, but members advise that you stay in direct communication with the owner to maintain trust as the ultimate decision-maker. You can also use advisors for the bad cop questions and that founder to founder relationship for the good cop stuff. An alternative option is to send in a trusted third party to approach them on your behalf. Some vendors respond better to a more informal approach from a NED or Chairman than an advisor. However, an advisor can sound out vendors without revealing your interest.

Matt Katz, Partner, Corporate Finance, Buzzacott “My advice to any client looking to make an acquisition is to start building that relationship with the prospective targets early on. Not two or three months before you think about buying them but six months, a year, maybe two years, because the more you know the vendor and understand their business, the higher the probability that you’ll have a successful transaction.”


STEP 5: HOW TO USE ADVISORS Advisors are a key part of your acquisition team and can be invaluable in finding, funding and negotiating the best deal. There are several key advisors who can help you define and achieve your growth objectives with acquisitions, and they should pay for themselves in the value they provide. You get what you pay for but remember that it’s now quite acceptable to cap fees for professional services - there’s more wiggle room than you might think.

Another key area of advice highlighted by members is on how to fund the acquisition and finding the right finance option. They can help you create a deal structure that doesn’t require external funding, or advise on how to use deferred considerations, earn outs or share schemes for a deal structure that works for all the parties involved.


Advisors can not only help you find acquisition targets but also potential buyers for your own business. “An experienced M&A advisor’s role does not end at having access to knowledge and potential buyers that you might otherwise not,” says Avondale’s Kevin Uphill. “They will help you manage the deal’s timelines, legal procedures, project management, create a competitive environment for buyers, and shape the transaction terms. Engaging specialists earlier in the process will help to optimise your strategy for scaling and drive value for the best possible exit.”

Members tend to look for corporate advisors with experience in their sector who understand their business and the types of business they’re looking to acquire. The expectation is that they can help them find acquisition targets, they will have a better understanding of a realistic valuation, and how best to negotiate. The best reason to work with corporate finance advisors is that they have seen the classic pitfalls for acquirers when buying businesses, and the different ways that vendors try to get a better deal. They have experience of seeing numerous transactions all the way through from conception to completion. “Transactions can become very personal and your advisor will act as the communicator between the purchaser and the vendor,” says Buzzacott’s Matt Katz. “Our role is both to provide clarity and help to maintain a good relationship between the buyer and vendor, by being the ones to deliver the tough messages. Our experience helps us to present a variety of solutions even in the most difficult situations. An acquisition exists past the completion date and, for it to be successful, the vendor and the acquirer need to be able to get on - sometimes for many years after the event.”


Tip: Consider your red line moment, as it will come. Be prepared to tell your advisors or the other party a flat ‘no’ as it will reveal how badly those involved want the deal to be done and provide you with leverage.

Lawyers with experience of working on the acquisition and sale of businesses will have a good relationship with various corporate finance advisors. They will undertake all of the due diligence on the target acquisition and identify any areas that require warranties and indemnities from the founder. They can also help to keep the deal on track and aligned with your acquisition strategy. “Buyers should expect speed and efficiency from their lawyer, sticking to the price and scope, and experience of acquisitions on the buy and sell side – ideally with relevant sector knowledge,” says Ed Persse, a partner at Osborne Clarke. “It’s also useful if the lawyer has a relationship with corporate financiers and tax advisors.”


TAX ADVISORS The other main area of advice that members often value is tax advice. While it’s important for the vendor to understand their tax position when exiting the business, there are some significant tax issues for the buyer as well. Some corporate finance advisors can offer this advice. Your deal structure may require tax clearances from HMRC or tax payments for some of the assets acquired. There are operational tax issues such as VAT registration or advice on recovering VAT on deal costs that have been incurred. You may need to seek tax warranties and indemnities from the vendor, particularly if they have used incentive schemes for key staff. And there is your own tax planning to minimise any future capital gains and inheritance tax liabilities for when you come to exit yourself. The earlier you seek this advice the better to prevent any tax issues arising during negotiation. It’s often too late to address these issues after acquisition or when you come to sell.

Charlie Mowat, founder, The Clean Space “Advisors have been great for taking the emotion out of the conversations and just making sure that the deal does get done. They’ve also opened our eyes to things that we didn’t even know we needed to be worrying about. The way we’ve picked advisors is generally getting referrals from people we know and trust, and then meeting them and making a decision on chemistry.”

STEP 6: NEGOTIATE THE DEAL Understanding the motivations of the vendor, and the value you need from the acquisition, will help you make the right offer. All members who have gone through the acquisition process agree that the best negotiation tool in your arsenal is being prepared to walk away, regardless of how much time and energy you have put into it. As a founder, you will empathise with the vendor but you may not fully understand their motivations for selling. Have they always intended to sell and do they have a figure in mind? Is it a distressed sale because of personal circumstances or market conditions?

Tip: Members caution against ignoring issues too close the deal (‘deal fever’); they might be small in isolation but combined could be catastrophic so refer it to your advisor.

The biggest thing to ascertain as early as possible is how involved the owner is in the business. Often, the big sales contracts are founder-led and owners will try to underestimate the cost of replacing themselves. This will help you determine not only valuation but deal structure and whether they will need an earn out to incentivise future growth. When buying out the majority shareholders it’s important to understand what motivates them and what they respond to. If they are visual thinkers, paint them a picture of what the company would look like if you ran it and where you can take it. If you want to keep them in the business, consider giving them a dynamic job title and incentivise them based on higher profit.

Then there are your own motivations for acquiring to consider. The offer depends on the reason for making the acquisition. Is it for the company name and market position or the people, skills, customers, and sales growth? For a purely commercial deal for sales and assets, the offer should make financial sense based on what the business will add to yours. For a strategic deal, where the acquisition will help to consolidate your market position, founders tend to pay what they think it’s worth. VALUATION No one valuation method will determine what the business is actually worth, and it’s ultimately defined by what someone is prepared to pay.

Tip: To find out what needs fixing in the business, ask the founder what s/he would do if they were given £100k to invest in improvements. This will likely highlight factors affecting valuation.

The most common valuation starting point is an EBITDA multiple based on sector norms. Tangible price factors include capitalization of earnings, discounted cash flow, net asset value or equity. Look at historic and current performance (sales, turnover, profit), future projections and financial management (cashflow, debts, expenses, assets). Other value factors include customer lists, contracts, IP, property, stock, debtors, and creditors.


More strategic price factors like market position, reputation, and brand value are worth more to some buyers. Other less tangible factors include relationships with suppliers, patents, licenses, and competition. You may be able to benchmark with what other businesses in the sector have sold for, or who else is for sale. When calculating your price, partner experts advise that you consider the entire P&L and all assets as well as potential elements of value that it will deliver to the business – both commercial and strategic. Also, consider the associated costs, whether it’s integration, investment in new systems, or replacing key staff that are unlikely to stay post-acquisition. One member points out that “it’s not just about EBIT; think about how much it will cost you to do what they’ve done and value it that way”. While one partner observes that there is less brand value at the small end of the SME market, it might mean a lot more to you and the industry if it’s a respected innovator that gives you a strategic or competitive advantage. You can value the business creatively, offering things other than cash that can increase the ‘valuation’ so they can say they exited for more. For example, offer cash and shares or an earn-out to value it higher but incentivize the vendor to deliver future growth. You can capitalise on the cost of sale with tax deductible elements. For example, include your time, a NEDs time, and paying off old directors (you may need to keep their accountants on for a period

Tip: Customers and suppliers may be able to give you information that affects your valuation, as well as information about market conditions affecting the business.

until the two sets of accounts are fully integrated). Why the business is being sold will affect valuation. Are there any outstanding or major litigation the business is involved in; or any regulatory changes which might have an impact on future growth? Is the vendor being forced to sell due to decreasing profits (this will justify a lower valuation but can you turn it around)?

Dan Scarfe, CEO, New Signature “The biggest thing we’ve learned working with a fund on a buy and build strategy is the normal rules of economics just don’t seem to apply. Normally, you look at the profit and operation of the company. For funds it’s all about hyper growth, top line revenue growth, and the addressable market that you might be able to service. That’s what gets those guys interested because that’s what makes your valuation, when they ultimately do a transaction at the end.”


In focus: negotiation checklist Here is a selection of ten tips and tactics about making an acquisition offer that have been recommended by members and partners of The Supper Club‌

01 Professional advice is invaluable as you go through the negotiation, valuation and purchase process; do your research on who to use and how to use them

02 Try to get involved in the process as early as possible; take some time to understand the jargon and spend time building relationships with the vendor and your advisors

03 Check out the rights of all shareholders as early as possible in case you need multiple signatures; you do not want this to come out at negotiation or completion stage

04 Give your vendor a clear project plan at the beginning, stating exactly what you want to see and get them to agree to it (as the acquirer, you should dictate the terms of the sale)

05 Consider agreeing your terms and conditions before exclusivity and consider a pre-tax clearance document which will help with due diligence

06 Vendors tend to prefer a payout instead of earn-out, but members recommend no more than 30 per cent cash as day one payout unless your acquisition is strategic

07 Don’t under-estimate the importance of warranties and make sure there are financial penalties if promises they made turn out to be untrue (whether they were aware of it or not)

08 Watch out for tax on outstanding audits, lease agreements in the company name, people who have been promised bonuses, pay rises, or extra holiday which can justify a lower price

09 Educate the vendor about the implications of not dealing with red flags; for example, get them to deal with any changes to employee contracts so you can be the good guy

10 Even with an agreement on the price and terms of sale, the deal could still fall through if it doesn’t meet conditions of sale - so make sure all the paperwork is in order and checked by advisors


STEP 7: DUE DILIGENCE Due diligence is a key part of the negotiation and advisors will help you determine a fair price. Once an offer has been made and accepted, you will be given access to accounts and business records for a period of time to undertake due diligence. This should give you a clear and realistic picture of how the business has performed, is performing, and likely to perform in the future. It should also highlight risks to mitigate and any issues requiring warranties. The vendor may agree to take the business off the market while you undertake due diligence. The seller may ask for a downpayment to secure this exclusivity period. The period itself is negotiable but most small businesses will need at least three to four weeks. It’s important to remember that due diligence is about more than checking the accounts. It should help you determine what needs to be fixed, what this will cost, if it will support your growth, and if you’re capable of maximising the opportunity. There are three types of due diligence that advisors can support: legal, financial and commercial: • legal - a lawyer should check if there is legal title to sell, all shareholders, ownership of assets, and any outstanding litigation, or regulatory issues as part of a sales and purchase contract • financial - your FD or accountant should check the books to see if there are any black holes or anomalies as well as any opportunities to maximise profitability

Tip: Consider a ‘mystery shopper’ exercise to test how they deal with new customers or putting someone into the business to check culture and politics.

• commercial - your corporate finance advisor can help you find out more about the reputation and market position of the business as well as competitors, customers, and suppliers Other key areas of due diligence to consider are: major contracts and orders (have they all been sold by the founder or sales director?), IT systems and other technology (are they fit for purpose and will you need to invest in replacing them?), R&D or new product development (are there any high potential patents you can capitalise on?), and marketing (how up to date is client data and has it been cleaned post-GDPR?). Some members recommend that you do your own commercial due diligence, particularly if it’s a competitor, because you know the market and what you need to see in the business. However, they also recommend getting good tax advice on your individual agreement to protect Entrepreneur’s Relief and legal advice on minority interests. Thoroughly check client records and employee contracts to see what you’re taking on and any risks to mitigate. For example, is the business too reliant on a small number of big clients and are they based on a close relationship with the founder? Are key employees likely to leave or will you need to make some of them redundant because they don’t have the requisite skills or technical knowledge? Will you need to invest in training? All of this could justify a lower price.


In focus: learn from your peers The Supper Club hosts regular roundtables and speaker events on topics related to acquisition through the year, with honest, practical insight from members presented alongside technical expertise from trusted advisors to the Club. Claudia Dreier-Poepperl, Founder & CEO of Calldorado, explains what she learned from a speaker event on Acquisition Strategies to Scale that she will apply in her own business: We have been in business for two years and we’ve seen tremendous growth. One aspect of growth is not just doing it organically but through acquisition and I wanted to learn the good and the bad aspects from other founders who have acquired. My three key takeaways were that you’ve got to have a proper process in place to find potential targets and for your due diligence to close the deals. The second nugget was thinking carefully about how you integrate the new entity into your culture. And thirdly, be prepared that some deals will fall through, and they will fail for a number of reasons so don’t be too in love with one deal or one company, and don’t pay a stupid price.

“Make acquisitions that maximize expected value, even at the expense of lowering near-term earnings.” Kevin Uphill, chairman, Avondale


STEP 8: ACQUIRING TALENT Getting under the skin of the business will help you find out who you need to keep - and how to motivate them to stay. People are the greatest asset of any business. You may uncover ‘diamonds’ you didn’t expect when acquiring a business but, realistically, you should prepare to recruit and replace key people - and factor this into the purchase price. Members have various tactics for finding out who contributes most value, who are at highest risk of leaving (and why), and who they can afford to lose. If the owner is staying in the business after the sale they will be motivated to help you retain the best talent (although owners can be obstacles to growth, so try to gain that insight through the due diligence process). Before cultural integration, it’s important to consider the regulations that govern what happens to employees when they are acquired with a business. When a business is transferred as a going concern, employees will automatically start working for the new owner under the same terms and conditions. However, if you decide you need fewer staff you will need to consider the possibility that an employee

Tip: Check if staff salaries have been increased or if they are owed lots of holiday so you can factor into postacquisition costs.

Tip: Some members have organised social events to bring their teams together before acquisition to find out more about each other and see how they gel.

might pursue a case for unfair dismissal or unfair selection for redundancy through a tribunal. Always consult a lawyer before making changes. Members and partners recommend that you wait until you have completed your due diligence before making any changes and always consult employees who may be affected (and their representatives). You will also need to consider pension arrangements. While you do not have to take over rights and obligations relating to employees’ occupational pension schemes put in place by the previous employer, you could face a claim for unfair dismissal if you do not provide comparable pensions arrangements - so seek professional advice. Another area that has caught people out when acquiring a business is rewards and incentives written into employee contracts that haven’t been factored into the costs of integration. It’s recommended that you look at every employee contract and their last appraisal to see if anything is linked to salary or performance. 


STEP 9: MANAGING INTEGRATION AND BEYOND Communication is a vital part of integrating new people and reassuring your existing team. Signing the deal is only the beginning. Partners and members warn against underestimating the time and cost of integrating two businesses and recommend a solid plan that you stick to. Members also stress the importance of communication, both to your existing team and those who have been acquired, with regular updates and consistent messages to help them adapt. You need to instil confidence and buy everyone into your vision. Members observe that integrating complex back-end systems and processes is the biggest challenge and recommend bringing in contractors or outsourced support if necessary to maintain business as usual. Customers may not want to migrate if it’s a hassle, and if values appear to be at odds with what they have come to expect, so members advise that you invest in maintaining front line sales and customer support (and meet personally with big clients). If the business owner is staying on as MD or sales director as part of an earn out, structure the deal to give them the best chance of achieving their targets as this will not only support your growth culture but provide a testimonial for future acquisitions. Is there a second tier of management in the acquired business that could take over and run it for you after an earn out ends? If so, factor their incentives into the deal. Be wary of offering equity too soon for key people and find out what motivates them. It might be status, autonomy, salary, or bonuses. One member has a 100-day checklist

Tip: Members recommend that you consider the impact of buying a business on your cash flow as their income won’t flow in immediately and there will be various costs related to integration.

Tip: Consider a 6-month hand-over so you can properly learn how the business works, but make hard decisions early as uncertainty will demotivate everyone.

similar to their due diligence list to support integration and stay on top of the various elements and keep new team members focused and motivated. He is clear on what needs reporting on in the new business and has post-acquisition meetings with each individual at 7, 30 and 60 days. He also uses small incentives along the way to keep everyone happy, like monthly bonuses. Another member uses buddy programmes for those coming into head office, with high potential staff working alongside the best performers who are most bought into company culture, vision and values. A key part of any integration is to remove any bugbears and manage expectations as early as possible. Key examples are hours of work, which may have been different or more flexible in the acquired business. Also look at holiday entitlement, pay reviews and bonus schemes. This will come out eventually as people work together so be as open as you can.

Dan Scarfe, CEO, New Signature “Culture is our biggest challenge. We’ve got all these different businesses coming together from all around the world with their own view of customers and how to deal with stuff. How can you integrate all of those different companies into one common consistent North star?”


In focus: integrating culture overseas Patrick Eve is MD of ZigZag Global, an eCommerce logistics platform that connects retailers with a network of 220 warehouses and 60 courier partners in 130 countries for handling returns from consumers. Previously, Patrick spent 11 years as the co-founder and MD of TranslateMedia, a global language services company with offices across the UK, Europe, Asia and the US. Patrick explains what he learned from his build and buy on a shoestring strategy to establish his businesses in the US: We had been on the ground in the US for about four years before we did our first acquisition, primarily to scale the business in the US market to build our client base. It was also a fantastic opportunity as it came at a bargain price to bring us some really high-end customers and extend our footprint out of the New York area and into other industry sectors. What we learned was that there were not only going to be challenges integrating that business with the UK culture but also the culture across the US teams as well. We had a very specific culture in our New York team so to then acquire this Austin business and integrate it in North America was harder than we thought. Eventually we took the decision to focus our attention on the East Coast market and around certain sectors which justified having the one office. So, we merged the teams into a single space which helped enormously. We have always allowed different offices to create their own culture, but based around customer service levels, working processes and KPIs that unite the business as a whole. Also, the business was waning slightly when we picked it up. We thought the employees we were taking on were the hardier bunch, but they were really the survivors who stayed to see what the acquirer would do and that created some cultural challenges for us as well. Despite this, we did come

out of it with a fantastic client base and some important learnings on what industry sectors we wanted to focus on as a business. After the acquisition we immediately made five new hires in the business, so we could inject some fresh blood into the acquired company and make it clear that we were focused on a fresh start. We also rebranded and relocated the business. One of the biggest headaches was moving people to an open plan working environment. There was also a lot of resistance from some individuals to becoming more client facing which is something that cropped up as we tried to implement our preferred working practices. It becomes clear very quickly those who want to embrace the new vision and those who are clinging on to the old ways. We also scaled in the US through a number of partnerships, primarily UK BPO partners and major advertising groups at the time. We also built an advisory board of US partners, which I’m now working on for ZigZag. An advisory board gives really valuable insight across several key areas. This includes recruitment, building company culture, and refining the marketing message to focus the sales approach, process and the decision maker - which can often be very different to that in the UK.


In focus: preparing for day one Ed Persse is a partner at international legal practice Osborne Clarke, focusing on domestic and international M&A, joint ventures and private capital transactions. Ed shares insights on buying and selling businesses based on his experience of acting for financial institutions, corporates, investors, management teams, family offices and entrepreneurs: What should founders scaling through acquisition expect from their lawyer?

What are the funding challenges that acquirers should be aware of?

You will be spending a lot of time together, so aside from being an M&A specialist with the right experience, expertise and resources, make sure you get on with them as well! Request unrestricted references, ask to meet the team, and be comfortable that s/he is going to complement you and your executive team.

As part of your acquisition strategy you will have budgeted for purchase price and professional costs. You may have considered structuring the purchase price so that part of it is payable after completion based on the achievement of certain financial or other thresholds (known as “earn out”).

Expect that s/he will invest time to understand your strategic goals, protect you from legacy risks, resolve issues commercially and legally and, ultimately, tell you when to walk away. Sector knowledge and the ability to plug you into his/her network are a bonus. Does size matter when choosing a lawyer? The firm that got you here may not be the firm to get you there. Size matters insofar as larger firms have deeper resource and wider skill sets (including merger control and tax, which are useful as you scale) but choose too large a firm and you may get lost in the weeds. So find the right firm for you based on size, expertise, cultural fit, costs and, ideally, someone who brings other resources to the table. It’s normal to talk to three. What due diligence issues tend to impact the success of an acquisition? Generally, it’s third party consents – whether key customers, regulatory authorities, lenders or shareholders. Specifically, it depends on the sector. Diligence on a tech business will focus on data and IP; on a food business it will focus on brand, customers and health and safety. Practically, as a buyer, encourage the selling team to nominate someone to focus on diligence - leaving others to ensure the business continues to trade as usual.

If you are using debt finance, engage with your bank early - to look at the impact on your existing facilities and also the likely appetite and conditions for acquisition funding. Consider using a specialist debt broker to compare the market. Growth capital providers typically offer equity investment with some debt. If you are considering VC or PE, prepare for dilution and external involvement. When structuring the deal with an investor ensure alignment in criteria for acquisitions. An investor should support your buy and build strategy with more than money; their backing can add credibility to you and your bid. What advice do you give acquirers who are preparing for their own eventual exit? Be strategic rather than opportunistic. Acquirers want to see that you bought company X because it took you into a new geographic or product market, for example. Engage regularly with your corporate advisors who will guide you on the impact of your acquisition on an eventual exit. If appropriate, incentivise the target’s management to stay and deliver their growth targets. Focus as much on the day after completion and the integration of the target business as completion itself. Ask yourself if the acquisition is the best way to achieve your objectives. Could the same outcome be delivered by recruiting a team?


Mike Lander, Co-founder, ENSOUL “There are four basic criteria that a seller should care about when entering a transaction: Value, Certainty, Timing, and Chipping. Is the price right for you, at that time? Is the buyer well-financed to pay at completion? Can they do a deal in 12-16 weeks? And does the buyer have a history of last minute chipping?”

STEP 10: PREPARING FOR EXIT Don’t compromise on your criteria for acquisitions and keep positioning your business for your potential buyer or investor. Whether you’re acquiring to accelerate scale or sale, it’s important to stick to your strategy. “Drifting away from it, or having an unclear strategy in the first place, will inevitably lead to poorer decisions, weaker results and drain on time, capital and management focus,” warns Avondale founder and chairman Kevin Uphill. For those looking to exit, it’s important to have a good understanding of the drivers of acquisitions in your industry. M&A advisors can keep you informed on the market, help you find the right acquisitions, and ensure you are well-positioned for the right buyer or investor. There are some common, but avoidable, mistakes made by founders scaling for a sale through acquisition. One of these is trying to scale too quickly, and not allowing adequate time to maximise capital value. Potential buyers will want to see that

Tip: The quality of your acquisition planning and integration process will determine how quickly you see bottom line benefit.

you have maximized the synergies of acquisition, with hard numbers and data to support your valuation. This is another area where advisors can add value, but a good CFO with experience of acquisitions and exits can lead this process internally. Perhaps the most common mistake is neglecting business as usual while focusing on the sale. Just as it’s important to have a leader to project manage acquisitions while maintaining day to day operations, make sure you have someone to lead the sale process and the continued growth of your business. An after-thought that some founders have lived to regret is not factoring in the tax implications of sale decisions, which can impact the final deal value and what they walk away with. A tax advisor can help you plan and keep you abreast of any changes in regulation.


In focus: M&A market Kevin Uphill is founder and chairman of Avondale, a multi-disciplinary corporate advisory practice specializing in business sales, M&A, strategy and corporate finance. He shares insight on trends in the M&A market and what this means for those looking for buyers and investors: What are the key trends in UK M&A, and what does this mean for those looking to exit in the next 12 to 24 months? According to the Institute for Mergers, Acquisitions and Alliances (IMAA), the number of global M&A transactions rose by 2.9% year-on-year in 2017, while the combined deal value actually fell by 2% during the year. This resulted in an average transaction value of $70.4m (£51.1m), down from $73.9m (£53.7m) in 2016 and $100.7m (£73.1m) in 2015. Big acquisitions create headlines, but we see a growing interest in smaller deals across global M&A markets. With larger scale deals failing to generate substantial returns over a long period, buyers see the long-term potential in the mid-market. Increasingly, larger corporates are finding that mid-tier deals offer greater flexibility, as well as an opportunity to capitalise on industry trends and technological advancements. One managing director working with Avondale admitted to previously regarding acquisitions below £50 million as a distraction, but he now sees them as core to growth and agility. Why is there more interest in acquiring or investing in smaller UK businesses? While considered riskier at the outset, smaller, strategic deals typically generate higher returns, delivered over a wider time frame. The Harvard Business Review estimates that small acquisitions typically boost annual shareholder value by between 8.2% and 9.3% over a sustained period, compared with the 4.4% average increase produced by so-called “big-bet” deals. But it’s not just trade buyers who are dipping their toe in the mid-market. With fundraising at record levels, low interest rates and a dearth of solid investment opportunities, Private Equity (PE) and Venture Capital (VC) funds are casting their

nets further afield. PE and VC buyouts now make up a substantial slice of global deal activity, and account for around 15% of Western European M&A deals. Growth equity investments – where expanding companies receive an injection of capital in return for a non-controlling minority stake – are also growing in popularity. In both cases, there is a demand for mature, high-potential SMEs that can offer a proven track record of growth. Why is foreign acquisition and investment increasing, and what are they looking for? Aided by a weak pound, British firms are in particularly high demand overseas. According to the IMAA, inbound deal flows into the UK rose by 69.6% in 2017 in value terms to £277.95 billion. Investors from China and Hong Kong alone spent £15.1 billion on Britain’s shores in 2017 – the highest amount on record, and nearly double the previous year’s total. However, a recent revision allowing ministers to intervene in foreign-led deals may have an impact on deals where the UK turnover of the target business exceeds £1m (a significant reduction on the previous £70m threshold). The changes are designed to prevent hostile takeovers or aggressive asset-stripping by foreign acquirers. Increased government scrutiny will not stop foreign buyers and investors considering UK opportunities, but company owners seeking an exit or a potential growth investment must act proactively and prepare for potential disruptions. Being able to call on M&A experience will be increasingly vital, and an experienced advisor can help firms navigate the regulatory complexities of overseas deals and foresee potential hurdles. They can also help assuage the fears of prospective investors by smoothing the path to deal completion.


CONCLUSION Be clear on your growth strategy and criteria for acquisitions to choose the right businesses - and prepare for integration to maximise value, writes Alex Evans. Whether you’re acquiring for scale or to sell at a higher value, it makes sense to prepare your business for the best outcome. This starts with a clear strategy and criteria for acquisitions to support growth, and it’s important to stick to it. If an acquisition doesn’t fit the strategy, reject it and keep looking. A common piece of advice is to create a process and find the right person with the right leadership skills to project manage acquisitions and ensure business as usual. This will help you build a strong acquisition brand, which will help you keep the best staff. Members value advisors for all aspects of the acquisition process, from strategy to funding to due diligence and tax planning. They should pay for themselves in the value they provide, and peer recommendation is still the most popular way of finding them. Debt appears to be the most popular option for funding acquisitions, building up a good track record and increasing capital value before seeking investment or an eventual sale. Equity is more expensive but comes with support to accelerate scale - and it’s had an enormous impact on growth for some members. Due diligence is a key part of the negotiation process as it will help you find red flags and ways to justify a lower price. However, a personal approach is important to understand the motivations

of the vendor and sell them your dream. The most common mistake seems to be under-estimating how involved the owner is in the business and the cost of replacing them. Building a relationship early will help to determine this and prepare for it. The value is often in the acquired talent, so members recommend good, consistent communication throughout the process and understanding individual motivations – as this will help you design incentives to keep them in the business and performing to a high standard. Remember that signing the deal is only the beginning and you should be preparing for day one and beyond. And for those looking to exit, make sure you’re well positioned for your future buyer or investor and keep looking at the market to see what you should be buying, and why.

Alex Evans, Programme Director, The Supper Club “The members who have successfully scaled through acquisition had a clear strategy for finding, funding and integrating businesses to extract maximum value. They also knew how to use advisors and get the most value out of them as well.”


Our supporting partners Thank you to Avondale and Buzzacott for supporting this guide and for their technical advice and trusted guidance for founders planning their acquisition and exit strategies Avondale is a multi-disciplinary corporate advisory practice, providing bespoke advice and strategic expertise for ambitious businesses in the UK and internationally in business sales, M&A, strategy and corporate finance. Over 27 years, it has overseen the sale and purchase of more than 500 companies, and is the Institute of Directors’ preferred business sales, acquisitions and strategy provider. Avondale’s lead advisory consultants are highly experienced in delivering exemplary strategies to guide you and your stakeholders through your unique journey. The process begins by understanding your business story so far and why, when and how you intend to move forward. It involves gaining a clear understanding of the overall goals – both professional and personal. Whether exit planning, unlocking wealth, acquiring a business or raising new investment to grow your company, Avondale will help you navigate every aspect of the process – with a clear strategy to achieve their ambitions and ensure maximum value. Avondale’s success – and that of our clients – is founded on a highly personalised, in-depth approach that delivers creative, intelligent solutions and outstanding results.

At Buzzacott, our vision as a corporate finance team is to build relationships with our clients for the long term, not just for a transaction. It is to guide clients in making the right decisions, with a focus on helping them maximise and realise value from £5m to £100m. We use our skills across a range of services, such as acquisitions, sales, mergers and fundraising, which allows us to really understand the mind-set of all parties, from entrepreneur to funder, to buyer. As a client of Buzzacott you will benefit from our hugely experienced network of business contacts that can support you with everything from raising finance to legal and M&A advice. As part of our wider corporate business offer, we also provide our clients with a bespoke valuations service. We regularly run sector events with our network partners that provide important learning and networking opportunities for our clients. We have over 330 staff working with 30 partners in specialist teams. Although Buzzacott is a modern firm, we are incredibly proud of our rich history and the success that we have achieved over nearly 100 years of business.


About The Supper Club Our mission is to inspire an entrepreneurial mindset in all leaders because we believe that where entrepreneurship thrives, so too does innovation, growth, and wealth creation. The Supper Club is an exclusive membership community of inspirational founders and CEOs of high growth businesses. Since 2003, we have enabled members to realise their growth ambitions. The average growth of our members is 34 per cent year on year with average sales from £1m to £500m. LEARN. CONNECT. GROW We support members through all stages of the entrepreneur lifecycle, from scale to sale and beyond. The Supper Club is highly valued for the quality and diversity of its membership, event experiences and pro-active personal support. We bring the right members together at the right time to support each other in their journeys by sharing the hardlearned lessons along the way. We help members find the knowledge and connections they need to make better decisions and spend their time more wisely. IT’S LONELY AT THE TOP Our members value opportunities to socialize and share challenges with peers, using The Supper Club as therapy and a virtual board when they need it. Applying a wealth of insight from nearly 3,000 peer learning events, we curate roundtables, chair panels, and design workshops around practical,

entrepreneurial thinking. Members share our ethos of Give and Get to support each other with open and honest advice in a relaxed, informal, and trusted environment. We have several membership options for founders & CEOs, and programmes for your senior managers. We consider all applications on their own merits and we meet all potential members face to face to ensure a good fit and a commitment to the Club’s values, culture and ethos. If you would like to explore membership of The Supper Club and the ways it could help you and your business, call our team on 020 3697 0810 or email getintouch@

Andrew Hookway, Founder & CEO, Extech IT “Connections through The Supper Club have directly helped us increase our turnover by 15%.” Cecile Reinaud, Founder, Seraphine “Every time I have gone to an event, I have come away with such an amazing positive energy, a list of things to improve within the business and networking contacts. It’s the best investment in time you can make.”


Buy to Build - 10 Steps to acquisition success  
Buy to Build - 10 Steps to acquisition success