Punching Out! The Additive Process: Tips on How to Buy a Board Shop or Assembly House

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Fourth Layer: Due Diligence

The letter of intent typically includes an exclusivity clause for 60–90 days to complete due diligence and to draft the purchase agreement documents. A buyer should have the due diligence request list ready well before an LOI is signed, so that it can be delivered to the seller’s team as soon as the LOI is signed. The due diligence period is the time for the buyer’s team to go over the seller’s information, inspect the facility and equipment, speak with customers and suppliers, and meet with key employees. If any issues come up, it is important to bring them up quickly and to discuss fairly. Sellers don’t like it if their baby is called ugly, so it is usually better if the teams handle the dirty work.

Fifth Layer: Closing the Deal

With each year, it seems that the paperwork and effort required to close deals keeps increasing. The legal and accounting teams will kill several trees to produce the documentation necessary to close the deal and to make sure there are no misunderstandings afterwards. Be sure to document all conditions of the deal, such as transition services for the outgoing seller, NDAs and employment agreements for remaining key employees, contingent payments such as earn-outs, etc.

Sixth Layer: Integration

Once the deal is closed, then the real work starts! Integration planning should start before the acquisition program even begins, as it is important to know who will be responsible for what function. The buyer may have already contacted some customers, suppliers, and key employees, and it is important to communicate well with these stakeholders so that no value is lost.

Here are some other key points:

  • Don’t over-pay! While that sounds like common sense, you can buy a company for $1 and still over-pay. All failed deals basically come down to this key point, and often the problem is with the buyer and not the seller (not enough planning, poor integration, over-estimation of synergies, too much borrowing/leverage, etc.). Be sure to keep In touch with your deal team and advisors before, during, and after the deal, and never be afraid to walk away if a deal does not make sense.
  • Don’t under-estimate the amount of effort needed: Just because a buyer has been a part of deals or read/heard about them, does not mean that the buyer is fully prepared to go through the process. The amount of effort and analysis required is a lot more than you see in the news. The closing Press Release may be 2–3 paragraphs long and include several positive quotes, but they never disclose that the deal took 12 months and endless conference calls to get over the finish line. Although that sounds daunting, proper planning and a good team can help make the process smoother.
  • Set Goals and Keep Things Moving: We all know that you have a business to run, and that makes it all the more important to set goals and time lines, and to keep the process moving. Once a process gets bogged down, either side can lose interest, a new buyer might come through the door and woo the seller, something might change with either business or in the markets, or any number of incidents may occur that will further delay or jeopardize the deal.

Every deal is different: Some are plain-vanilla, double-sided deals, while others have 48 layers with plenty of blind and buried vias, but most deals follow a basic pattern. With enough planning and a proactive program, you too can grow your company through acquisitions. 

Tom Kastner is a Senior M&A Advisor for Woodbridge International, a global investment bank, and the President of GP Ventures, a tech-focused M&A advisory firm. To contact Kastner, click here. 



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