Master strategy - planning for a successful acquisition

The groundwork of any successful acquisition is a clear, well-articulated rationale, questioning the specific objectives they want to achieve.

As discussed in Part 1 of the Series, common motivations include:

• Expanding into new markets or geographies.
• Broadening product or service offerings.
• Securing key talent or intellectual property.
• Gaining access to new customer segments.
• Achieving economies of scale.

By defining strategic priorities early, targeted search parameters can help to avoid distractions and focus on opportunities that truly align with the vision. We will cover common pitfalls in Part 7 of this series, but for now, note the acquirers that fail to achieve their intended vision usually have an unclear or vague reason for why a specific acquisition moves them towards the end goal.

Pursuing growth for growth’s sake doesn’t always result in synergies.

How do you avoid vague objectives? Develop an acquisition thesis. A thesis is a concise statement which tells everyone internally (the deal team, the CEO/CFO, the shareholders, etc.) and everyone externally (the target, advisers, lawyers, etc.) the value and expected outcomes from a transaction.

This living document guides decision-making and helps the acquisition process remain disciplined. Questions to consider are:

• How will this acquisition complement or transform our core business?
• What are the quantitative and qualitative indicators of success one, three, and five years after the deal?
• What are our non-negotiables
• Are there any red flags to be considered?

When a prospective acquirer comes to us looking to identify an acquisition, our first question will nearly always be, what is the rationale? The more developed the acquisition thesis, the quicker we can get moving on a target search.

Once you have a thesis, you need a team to enact it. A successful acquisition is rarely the work of a single visionary, requiring a cross-functional team drawing upon internal and external expertise. Key roles include:

• Leadership – Often the CEO, owner, or one of the directors, with responsibility for overall direction and alignment with strategic goals. Typically, in an owner-managed business, the directors as a collective will agree a transaction. For those new to acquisitions, busier directors who don’t have the capacity, or for those companies with a number of targets on their list, the person running the transaction may sometimes be an external M&A adviser.
• Project Manager – Whilst the directors will have the final say on the deal, there are many other priorities on their list; therefore, a specific employee to act as an internal project manager and point of contact for external stakeholders/ advisers will help to coordinate activities, timelines, and communicate between parties. This will often be a finance manager, accountant, or trusted and long-standing employee.
• Advisers – Handling valuation, modelling, and funding considerations, M&A advisers and industry specialists provide objectivity and technical expertise. With advisers on side, an acquirer has confidence that all on and off-market opportunities have been considered and they’re not overpaying when it comes to deal value negotiations.
• Lawyers – Drafting legal documents such as the SPA (Sale and Purchase Agreement) and overseeing the legal due diligence, lawyers will maintain an important role once a broad agreement for the deal is in place. DD has been discussed further below, as a necessity for successful deals.

For SMEs with limited resources, it is often prudent to engage external advisers early – especially for complex or first-time deals.

With objectives set and a team in place, the search for suitable targets begins. We will cover the acquisition process in Part 4 and search process in more detail in Part 5 of the series; however, for now, know that the process should be systematic and data-driven:

• Develop target criteria: Desirable products/ services, revenue range, profitability, geography, culture, customer base, headcount, premises, business culture/ ethos, and strategic fit/ synergies.
• Build a target list: Use industry/ transaction and corporate intelligence databases, personal networks, brokers, and direct outreach.
• Initial screening: Evaluate targets against your weighted acquisition criteria, focusing on potential synergies and cultural compatibility.

Building a solid pipeline of opportunities allows SMEs to compare options, negotiate from a position of strength, and avoid settling for the first “good enough” . The next steps in the process will likely be a form of outreach to the target’s management and a valuation assessment (we will cover this in more depth in our next guide). As advisers, we would usually carry out these steps and therefore little planning is required from the acquirer beyond close communication, review, and signoff.

Due diligence is the process of verifying information, addressing risks, and validating assumptions. For SMEs, this stage is pivotal, as resources to absorb negative surprises are often limited.

Prior planning is important as even the most competent and experienced acquirers may require sector specific experts and advisers. Due diligence will usually be split across five main categories with each having a varying level of importance for the deal. However, sparing on one of the five pillars brings more uncertainty and therefore risk – such an assessment, if left to the last minute (without planning), can extend deal timelines and make an offer appear less competitive.

The five pillars are:

• Financial & tax due diligence: Scrutinise historical and projected financial performance, examining quality of earnings, working capital needs, assets and liabilities, and tax compliance.
• Commercial due diligence: Assess market positioning and growth prospects, customer concentration/ retention risks, product and services review, R&D, synergies and integration planning, and competitive threats.
• Operational due diligence: Review key processes and workflows, IT infrastructure, cyber security, supply chain and inventory management, assessing facilities and equipment, environmental impact and compliance, and vendor dependencies.
• Legal and regulatory due diligence: Identify pending litigations, compliance issues, change of control, intellectual property portfolio review/ protection, corporate governance, and regulatory exposures.
• Management due diligence: Appraising the capabilities of the existing leadership team to identify any gaps/ deficiencies, key personnel employment contract/ benefits, and a review of the cultural fit.

The cultural fit and mindset of the employees can be a transparent indicator as to whether an acquisition thesis will be at risk from integration challenges.

SMEs should tailor the scope of diligence to the size and complexity of the deal but never cut corners.

As we have seen before, uncovered issues at this stage can derail even the most promising transaction. With a distinct transaction services team at Price Bailey conducting Financial & tax due diligence year-round, reach out to us if you would like to discuss any DD questions from scoping an acquisition to understanding the fee level you should expect for a given deal.

Structuring a deal involves more than agreeing a price. For SMEs, creative deal-making can bridge gaps in valuation expectations and align interests. Considerations include:

• Assessing the market for comparable transactions: Don’t over-value the target. This is easier with an off-market deal as you can avoid being drawn into an auction process where you may be tempted to over-pay, however such opportunities are harder to find. For every pound paid beyond intrinsic value, you risk diminishing the value of the acquiring operation.
• Upfront vs. Deferred Payments: Earn-outs and performance-based payments can share risk and incentivise future collaboration.
• Equity Participation: Decide whether offering equity in the combined entity, or a retained carrying interest is something the acquirer is willing to consider, as this can help retain key talent or sellers who wish to stay involved.
• Funding Sources: Establishing sources of funds (Part 2 of the Series) can establish guidelines within which an offer can be formed and identify timing limits for upfront versus deferred payments.

To find out more about ‘The importance of working capital in pricing mechanisms’, you can read our blog here. 

Even the best-planned acquisition can falter if integration is neglected. It is crucial to plan for integration from the outset and allocate dedicated resources.

There are simple decisions which can be agreed in advance to better prepare for completion. For example:

• Integration leader: Appoint a dedicated individual responsible for managing the integration and keeping the project on track.
• Day 1 readiness: Ensure business continuity – payroll, supplier payments, customer service – on the first day post-completion.
• Cultural alignment: Communicate openly with employees, explain the rationale, and address concerns proactively.
• Synergy realisation: Set clear metrics for expected synergies (cost savings, cross-selling, and revenue opportunities) and track progress closely.
• Retention of key talent: Identify and secure critical personnel, recognising that uncertainty can drive valuable talent .
• Develop your 100 day plan: Be ready to hit the ground running with a clear strategy to address the above and other aspects of the integration, linking back to the original acquisition thesis as a reminder of why the deal was pursued.

Integration is a journey, not a box-ticking exercise.

SMEs should invest time in listening to employees, balancing existing norms and new protocols, and celebrating early wins to build momentum. Measuring success post-deal is complex, however, we will review some tips and tricks in Part 8 of the Acquisition Series (watch this space!).

Every acquisition carries risk. Proactive acquirers plan for likely pain points, outline deal-breakers, and develop corresponding mitigation strategies.

Common risks include:

• Unrealistic synergy assumptions.
• Loss of key customers or talent.
• Regulatory or legal hurdles.
• IT integration failures.
• Cultural clashes.

Regularly revisiting and updating a risk assessment ensures the team remains alert and prepared.

Ultimately, considering the risks and pre-empting external influences, results in a more robust acquisition plan and a greater chance of success.

We will discuss risks further in Part 7 of the Series.

A successful acquisition delivers measurable value; not just in headline synergies but in tangible improvements to the business. SMEs should establish clear KPIs – such as revenue growth, margin improvement, customer retention – and implement a rigorous review process at set intervals. Transparent reporting builds accountability and provides early warning signs if course correction is needed.

A practical method for tracking performance is to maintain the original acquisition valuation, enabling acquirers to assess whether expected synergies are realised and if the combined entity increases value compared to the sum of the parts.

Fortunately, we have several articles regarding business valuation, such as Valuing a Company. For more information or assistance in valuing a company, reach out to us.