Business Transfers – Part 2: Acquisition Objectives

Business Transfers – Part 2: Acquisition Objectives

This second of the six-part series on Business Transfers will focus on acquisition objectives of the parties to merger and acquisition transactions, including stock sales, assets sales, takeovers and buyouts. This series focuses on a privately negotiated, non-auction transfer of a business or its ownership. To orient readers, we offered an Introduction to Business Transfers in Part 1. In subsequent parts of this series, we will address the following topics:

Part 3 – Seller Preparations

Part 4 – Acquisition Process

Part 5 – Acquisition Methods

Part 6 – Implementation

Due to complexity and length, the topics identified in this series provide only a sampling of the issues we have encountered in Business Transfers.

A.  Possible Seller Objectives

1. Create liquidity for shareholders
2. Access to complementary products and markets
3. Access to working capital, resources and infrastructure
4. Access to customers and distribution channels
5. Gain critical mass
6. Other benefits of major corporate affiliation
7. Tax minimization

B. Possible Buyer Objectives

1. Acquire product line or key technology
2. Acquire creative, technical and/or management talent
3. Eliminate a competitor
4. Acquire a new distribution channel
5. Acquire expertise and entry in a new market
6. Tax minimization

C. Understanding Objectives for Negotiations

1. It is critical to understand, identify and prioritize your own objectives.  Since the negotiation process requires compromise, it is vital to know what can be traded and what is non-negotiable.
2. Determining the other party’s objectives (generally through questions and discussions between management and the broker or financial intermediary) is necessary for a sense of the other party’s objectives and priorities to allow creative negotiations for win-win solutions.
3. The parties should approach negotiations in the spirit of seeking a mutual solution to the issues before them – the purchase and sale of a business.  Principled negotiations, in which the issues are attacked but not the individuals, are fundamental.

In our next series, we will recommend seller preparations to maximize the company’s attractiveness, buyer interest and pricing. To optimize results, these preparations require significant time and planning.

This blog does not establish an attorney-client relationship and does not constitute legal advice. Legal outcomes are based on the particular facts of a situation and the application of the law to those facts.  Anyone with issues described in this blog should hire an attorney for legal advice based on the relevant facts. The firm has no obligation to maintain the confidentiality of any information received by email or comments.