Here’s what you need to know about navigating a business acquisition as a growing brand founder

A business acquisition is one of the most challenging processes that you can endure as a company owner, from both sides. Indie businesses must consider many different factors when engaging in a company merger, from valuing your overall brand to accurately estimating your business growth trajectory. 

Are you feeling like it is time for your company to grow? As an indie business owner, you may be wondering whether a business acquisition is the right choice. Is it worth it to navigate a challenging process that may not pan out exactly as you had hoped? 

What Is a Business Acquisition? 

A business acquisition is a financial transaction in which a company purchases most or all of another company. The key is that the buyer usually needs to purchase 50% or more of the acquired company to be the majority stakeholder. 

While mergers and acquisitions are often used interchangeably, there are some key differences. The main distinction is that in an acquisition, the acquired company still legally operates as a separate business from the parent company. In a merger, the acquired company becomes part of the parent company. 

How Long Does a Business Acquisition Take? 

The timeline for a business acquisition depends heavily on the type of situation and the size of the companies. A small business, such as an indie company, may complete the process in a few months, while deals between major corporations can take up to a year. 

The timeframe for the business acquisition could extend due to factors such as unforeseen legal problems or regulatory inspections from government entities, if required. 

Before you begin the acquisition, meet with experienced professionals such as Abacus Finance experts to get an estimate of how long the transaction will take. A rough timeline can help you plan and budget accordingly. 

What Should You Consider During the Business Acquisition Process? 

Navigating a business acquisition is challenging for everyone involved, so it is crucial to understand the steps to take in order to prepare. Here are some key factors to consider as you move through the process. 

Your Overall Founder Strategy

Indie businesses thrive with founders and owners who remain involved. A founder strategy is your personal plan and vision for the company, which encompasses everything from product labels to marketing. 

A founder strategy leads to more loyal customers because it builds trust. Potential buyers feel more comfortable purchasing a product from a company that has a consistent and personal vision. 

When acquiring a company, consider how the new business will fit in with your founder strategy, and whether your values are aligned. 

The Impact on Your Brand Valuation 

Brand valuation is essential to determine the amount of funding you will receive when applying for a loan or a grant. There are several ways that you can value your brand, including: 

• Comparing your business to others of similar size in your market space 
• Estimating future income and cash flows 
• Looking at historical costs and expenses to run the company

Your Business Growth Trajectory 

Factor in the acquisition to determine future business growth. You can use predetermined mathematical formulas to do this, or make an estimate by evaluating how many customers you receive for your product or service. 

A Realistic Acquisition Timeline

While you may want to get your business up and running following the acquisition, the process can take much longer than you originally anticipate. Potential legal complications could lead to an extended discovery period, in which both parties gather evidence to determine if the acquisition is legally sound. 

Cultural Fit

Culture is a crucial element when considering a business acquisition. If the new company does not fit in with the parent company’s culture, then it will only lead to clashes and disagreements down the road. Customers might also be confused when seeing two companies under the same umbrella with drastically different cultures and values. 

Frequently Asked Questions 

How Hard Is It to Get a Business Acquisition Loan? 

It can be more difficult to get a business acquisition loan than it is for other loan types. It also depends on where you are getting funding from. 

The Small Business Administration (SBA) typically has more stringent requirements for funding. They evaluate your income, business position, and other factors before deciding. While getting a loan from the SBA may be more tedious, it often comes with advantages like competitive rates and benefits.

Receiving funding from private lenders may be easier, but you also must think about the trade-off. You might receive more funding, but this also can come with higher interest rates and fewer protections. It is all about weighing your business’s priorities and deciding which type of loan works best for your needs.

There are even more challenges for Black business owners. Even though legal protections are in place, Black business owners often face subtle discrimination in lending situations (CFPB) and often need to show more proof of business solvency to receive funding. 

Who Typically Gets Laid Off in an Acquisition? 

While companies may do their best to keep all employees during an acquisition, some overlap is inevitable. Ultimately, it is necessary to do what is best for the company and for future financial health. 

Some of the positions that are most vulnerable to layoffs include: 

• Administrative staff
• Redundant leadership 
• Information technology and tech support 
• Human resources
• Legal 

Some companies offer employees new positions within the merged business so they will not have to leave. Others do not have the bandwidth or the openings to accommodate those employees. 

What Percentage of Acquisitions Fail? 

An Investopedia article, citing information from Harvard, reports that an astounding 70 to 90% of business acquisitions fail. While planning is crucial, a business acquisition deal may face unforeseen challenges, such as: 

• Lack of cultural integration 
• Not enough funding 
• Miscalculating capacity needs 
• Poor company valuation 

Understand How Business Acquisition Can Grow Your Brand

For an indie brand, a business acquisition represents more than just merging two companies. It is the blending of cultures, ideas, and values. It is important to consider every aspect of the business acquisition process before moving forward with the deal. 

Are you a business owner or professional looking for more insights to improve your company? Take a look around our website for further information.