Buy-Side Advisory
At FLB Partners, we provide flexible solutions tailored to your needs — supporting specific parts of the acquisition process or taking full responsibility from start to finish.
Acquisition Advisory Services
- Developing an acquisition strategy and screening potential targets.
- Gathering information and building a business case.
- Conducting valuation and preparing an indicative bid.
- Negotiating commercial terms and preparing a Letter of Intent (LOI).
- Managing due diligence projects, including engaging advisors, defining scope and coordinating stakeholders.
- Preparing decision material for management, the board and owners.
- Signing and closing of the transaction.
- Developing a communication plan for post-acquisition integration.
- Calculating the final purchase price, including adjustments for net debt and normalized working capital.
- Integrating the acquired company.
- Purpose: How the acquisition supports the company’s strategic objectives.
- Acquisition criteria: The criteria used when evaluating potential acquisition targets.
- Market analysis: Analyzing the market and its trends to identify attractive segments.
- Target screening: Identifying and evaluating potential acquisition targets.
- Internal processes: Adapting internal processes and workflows to ensure an efficient, tailored acquisition process.
Establishing an Acquisition Strategy
Creating an acquisition strategy is central to defining what type of acquisition to pursue and how it contributes to the overall corporate strategy. A well-formulated acquisition strategy aligns understanding and direction, increasing the likelihood of successful acquisitions and long-term growth.
Dialogue and Information Gathering
The acquisition dialogue is usually initiated through contact with the target company to build a relationship with the business and its owners. During this stage, information is compiled for initial valuation and for developing hypotheses on how the target could be operated and integrated post-acquisition.
- Meetings: Discussions about operations, strategy and future plans.
- Questionnaire: A detailed questionnaire sent to the target company to provide deeper insight into its financial and operational position.
- Information Memorandum (IM): If the target company has initiated a sales process with advisors, an information memorandum is often available that provides detailed information about the company.
- Historical financial performance.
- Capital structure.
- Budgets, forecasts and estimated future free cash flows.
- Macroeconomic and industry-specific factors, along with the company’s risk profile.
Company Valuation
Valuation is a critical part of the acquisition process. The most common methods are discounted cash flow (DCF), multiples valuation and net asset valuation.
Building a Business Case
A well-developed business case is essential for creating a common understanding of the acquisition and its potential, and increases the likelihood of successful integration and long-term growth. The business case should be continuously refined throughout the acquisition process to ensure that decisions are always based on consistent and up-to-date analysis.
- Rationale: Describe the strategic and financial rationale for the acquisition, including potential synergies.
- Market analysis and potential: Describe the market, growth opportunities, and their impact on the target company.
- Valuation and key assumptions: Outline the valuation of the target company and the assumptions underlying it.
- Investment needs: Estimate the investments required for the acquisition.
- Risk analysis: Assess potential risks and outline strategies to mitigate them.
- Buyer description: Describe the buyer and the strategic rationale for the acquisition.
- Valuation and commercial terms: Outline the valuation and purchase price structure.
- Assumptions: Describe assumptions underlying valuation and commercial conditions.
- Future plans: Describe the future plans for the target company post-acquisition.
- Seller’s role: Clarify the role of the seller after the transaction is completed.
Indicative Bid
Based on the established business case and valuation, an indicative bid is prepared to provide a formal indication of interest and valuation of the target company, as well as to outline the key terms and assumptions of the transaction. The indicative bid is non-binding and provides the basis for further negotiations and due diligence.
Negotiation and Letter of Intent (LOI)
The indicative bid is followed by negotiations and a Letter of Intent (LOI), which sets out the main terms of the deal before formal due diligence begins and definitive agreements are drafted.
This phase often involves discussions and compromises to align expectations and ensure both parties are comfortable with the agreed terms. Signing an LOI significantly increases the likelihood of a successful transaction by establishing a clear framework for the deal.
- Key terms: The main terms of the acquisition, including purchase price and structure.
- Due diligence: The scope of the due diligence process.
- Exclusivity: Agreements giving the buyer sole negotiating rights for a defined period.
- Future role: The seller’s role in the company post-acquisition.
- Timeframes: The schedule for the steps leading up to completion of the transaction.
- Market and Commercial: Includes analysis of the target company’s market position, customer base and competitive landscape.
- Financial and Tax: Covers detailed analysis of the company’s financial history, cash flows, liabilities, assets and tax matters.
- Legal: Includes review of agreements, licenses, IP rights, litigation and other legal obligations.
- Operational: Focuses on the company’s operating processes, sales and marketing, and production capacity.
- IT and Technology: Reviews the company’s IT systems and technical infrastructure.
Due Diligence
Due diligence is the buyer’s review of the target company’s commercial, financial, legal and operational aspects. The purpose is to identify risks and verify the assumptions underlying the transaction.
It is typically conducted by external advisors with specialist expertise, in collaboration with the acquiring company’s team.
Purchase Price Mechanisms
In acquisitions, there are different ways to structure the purchase price. The two most common principles are a fixed purchase price (locked box) or a preliminary purchase price with subsequent adjustment (completion accounts).
With a fixed purchase price, the agreed price is paid on the closing date and is not adjusted retrospectively. A preliminary purchase price with subsequent adjustment, on the other hand, is adjusted retrospectively based on a completion statement.
- Preliminary purchase price: Paid on the closing date, based on a preliminary completion statement.
- Preparation of completion accounts: Prepared post-closing and reviewed by both buyer and seller.
- Review and approval: Both parties review and approve the final completion accounts.
- Final settlement: The preliminary purchase price is adjusted against the final completion accounts, leading to the final settlement of the purchase price.
- Summary of key due diligence findings – including identified risks and opportunities.
- In-depth acquisition rationale – outlining the strategic and financial justification.
- Market analysis – detailed analysis of the market and its potential.
- Financial analysis – including identification of synergies and cost-saving opportunities.
- Recommendations – for management, the board and shareholders.
Decision Support
With comprehensive decision support, management, the board and shareholders can make informed decisions about the acquisition. This ensures that all aspects of the deal are thoroughly analyzed and that there is a clear plan for successful execution and integration.
Signing and Closing
After due diligence, final negotiations begin. This is the phase where previous agreements are formalized and ownership of the target company is transferred from seller to buyer. It requires careful review of all documents to ensure that both parties have a clear understanding of the final terms.
- Final negotiations: Concluding negotiations to finalize all terms.
- Review of agreements: Reviewing all relevant documents before signing.
- Signing of agreements: Formal signing that binds the parties to the transaction.
- Closing: Official transfer of ownership and execution of any side agreements.
- Addressing specific conditions: Including regulatory approvals or other requirements.
- Internal communication: Clarify changes and their impact within the organization.
- Customers and suppliers: Keep external stakeholders informed.
- Integration overview: Describe how and why the target company will be integrated.
- Roles and responsibilities: Define expectations and responsibilities.
- Risk management: Address potential risks and communication challenges.
Communication in Acquisitions
Keeping stakeholders informed and engaged is critical both during and after an acquisition. A well-structured communication plan reduces uncertainty, builds trust, and prepares stakeholders for upcoming changes. By developing and following a detailed communication strategy, in cooperation between buyer and seller, the process can be managed smoothly and efficiently.
Post-Acquisition Integration
After ownership transfers from seller to buyer, the critical integration phase begins, aligning operations to maximize value creation and achieve the defined strategic objectives. Effective integration management and ongoing follow-up are essential to ensure that integration goals are met. The integration process should be tailored to each unique situation, ranging from light-touch integration to full integration or merger.
- Operational integration: Aligning IT systems and databases to ensure business continuity.
- Processes and procedures: Harmonizing work processes and procedures across the two companies.
- Financial integration: Merging accounting systems and financial processes.
- Personnel strategy: Strategies for retaining key personnel and managing pensions and benefits.
- Supplier agreements: Reviewing and consolidating supplier agreements to achieve cost savings and strengthen relationships.
