Business transactions are generally connected by the various stages related to the process. Naturally, depending on the project, different phases receive different emphasis and can appear very different, and sometimes not all phases even exist. However, it is good for those who are planning a business sale or purchase to know in advance what kind of stages a business acquisition project may include during its life cycle.
Acknowledgment phase and preliminary negotiations
Regardless of whether the party who initiates the acquisition is the company owner or the buyer, in the first phase of the acquisition, it is mapped out what we would be doing business with and with whom. The buyer considers the strategic, operational and financial goals of the purchase, while the seller primarily mentally prepares to give up the company and examines the company’s sales potential.
Letter of intent and confidentiality
A successful exploration phase, where potential business partners have found each other, usually leads to the conclusion of a letter of intent on the details of the transaction. Usually, the target schedule for the transaction, the preliminary parameters regarding the purchase price, the preliminary inspection of the object to be purchased (due diligence inspection), the buyer’s negotiation privilege and the confidentiality obligations related to the process are agreed upon.
Due diligence inspection and deed negotiations
The buyer rarely has in-depth knowledge of the object to be purchased, and thus at this stage the seller provides the requested information about the company, which is recommended to be checked by experts. A due diligence inspection typically reveals legal, financial and, for example, fiscal matters, which are reflected in the contract negotiations. Negotiations usually take place at least on valuation and the seller’s post-sale responsibilities.
Implementation of the deal and the documents related to it
Due diligence inspection, negotiation of the deed of sale and thus also the preparation of the documents related to the implementation of the deal may go quite parallel in the process. Employment contracts may be signed for key employees of the selling company, and sometimes due to the structure of the deal, there may be a need for a shareholder agreement. The execution of the transaction may involve very varied document needs.
A well-run business process can fall into a clumsy takeover. The employees of the acquired company, the seller and the buyer themselves are all on the brink of the new, and therefore a smooth takeover should be kept in mind from the beginning of the acquisition process.