Question

Discuss the important of timing when completing acquisitions.

Answer 1

Acquisition can take a long period of time from inception through consummation a period of 4 to 6 month in not uncommon.

The time frame will depend on the urgency of the buyer to perform due diligence and complete the transaction and whether the selling company is able to run a competitive process to sell the company, generating interest from multiple bidders.

- With the assistance of an investment banker or financial advisor, run a tightly controlled auction, sale process so that potential buyers are forced to make decisions on a shorter time frame in a competitive environment.

Time frame is very important in case of acquisition. Generally it takes 3 months to complete and finalize if both companies decide to cooperate well and work together to get it done. However in some cases acquisition can take up to a year or more.

Depending on following factors ; the process can be completed quickly or stretched out until both parties decide to cooperate and come to an agreement.

A)Decision making- Acquiring a company is a big deal and involves many thingst tothink about.

The acquiring company also needs time to research about target company, they also rethink about their decision whether it is viable or not.

Target company also takes time for taking decision whether they should give up their assets or not. If both parties agreed then definitely deal will be converted , but, if one party is not convinced then time can be stretched.

B) Complexity of transaction- Generally companies will acquire same kind of business companies.And sometimes companies tries to come in different sectors so, they take time to understand the business, management or product. Work-area or zones also play the important role.

Acquiring company management can take time while taking these decisions.

C) Management- This is mostly related to board of management. Sometimes management team of the target company is not willing to work with management of acquiring company.

This can also stretch the completion of acquiring time.

D)Due Diligence Phase-when buying a business the due diligence stage should not take any longer than around 60 days and business owner will want to close the deal asap. Sometimes delays happen from the seller side and time stretch.