The Critical Importance of An Acquisition Action Plan
With any business acquisition, we recommend and prepare a comprehensive business acquisition strategy.
Tax aspects of a contemplated acquisition should be considered before sending a letter of intent.
At the top of the to-do list is a thorough consideration of all tax-related aspects of the contemplated business acquisition.
Frankly, consideration of the tax consequences of an acquisition should precede drafting a letter of intent. The structure of the transaction should take into consideration the tax consequences of the business transaction.
Over the years, I have observed that many clients will proceed to draft a letter of intent without consulting with us, or with tax advisors. We advise against this approach. It might best be described as "penny wise but pound foolish.
A comprehensive letter of intent should reflect all material terms and conditions of a proposed transaction.
We recommend a detailed, comprehensive letter of intent which incorporates all the salient terms and conditions of the contemplated business acquisition.
For if there is no meeting of the minds between the two principals, why wait to discover that? Knowing there is and can be no meeting of the minds early on will save all parties the time and expense of a proceeding with a transaction that will never be consummated.
Rarely do we have clients get beyond the letter of intent stage and not close the contemplated transaction. Perhaps, this is the case because we put such emphasis on the comprehensive letter of intent. It reflects all of the information available to us and our client about the business to be acquired and how the contemplated business transaction will be structured, including tax consequences.
After the letter of intent is negotiated and signed, we then proceed with a truly comprehensive due diligence review of the to-be-acquired business.
A phased due diligence review will quickly locate sticking points while producing documentation to be incorporated into the acquisition agreement.
Here again we start with what is most important. If there are problems that might prevent a transaction from being consummated, we want to know that at the earliest opportunity to save time and expense.
A strong due diligence strategy is often broken into different phases. Each phase can be divided and allocated between the in-house business acquisition team, the auditors, the legal team, and any others deemed relevant.
As the due diligence review proceeds, the client or the investment bankers are typically working on the financing of the contemplated business acquisition.
We then proceed to the acquisition agreement and other related documents, which dovetail nicely with the due diligence as much of what comes to light in the course of the due diligence review will later be reflected on the disclosure schedules to the acquisition agreement.
Then of course as the acquisition agreement is negotiated and finalized, along with the disclosure schedules, we prepare the necessary closing documents.
Our comprehensive business acquisition action plan details all of these steps at the front end so that the team working on the acquisition knows what to expect from whom and when.
Our goal in all of this is to facilitate a seamless process. Different responsibilities are allocated and different tasks are performed by different team members. All are working independently but coordinating their activities as a part of the larger team. Each task is performed and completed in ample time to maintain the momentum of the team and the transaction.
Our business acquisition action plans are flexible enough to accommodate variations from transaction to transaction yet rigid enough to maintain the momentum of the business acquisition process.