Alone, with business partners, with external investors or even with a vendor?

In this installment of our series, we take a step back and look at different variants of company acquisition. The chosen variant has a significant influence on the following steps, and especially very narrowly is related to the issue of funding sources (which we will cover in the next part). It is therefore necessary to first examine the broader strategic context. Understanding one's own motivation for the acquisition and evaluating the possibilities of cooperation can significantly influence the success of the entire process.

This article will therefore help you understand the strategic considerations behind the decision, whether to go it alone, to cooperate with your business partners, whether to involve external investors or even whether to cooperate with the seller and join the company alongside him.

1. Why are we buying the company at all?

The acquisition of a company can fulfill various strategic objectives, such as:

• Expanding market reach: acquisition of a company in a new geographic area or market segment.
• Diversification of product lines: adding new products or services to the portfolio.
• Gaining a competitive advantage: eliminating a competitor or acquiring unique technologies and skills.
• A platform for collaboration: Combining the resources of several business partners in a company to increase efficiency and profitability.

Clarification the reasons for the acquisition will help you make decisions and determine the best approach.

2. Do I need someone else?

One of the first decisions is whether to proceed independently or to choose cooperation. This choice affects control over the entire transaction, over the newly acquired company, the distribution of risks and, as a result, of course, the distribution of revenues.

• Independently: As a result, we remain in full control and the dividend harvest is ours alone, but at the same time we also bear all the risks and the entire burden of financing (both for the purchase and for the subsequent transformation and operation of the company).
• Cooperation: This option involves the sharing of resources, risks and expertise, but also involves a partial loss of control and the sharing of future profits.

Of course, if we enter a new company with the aim of creating a platform for cooperation with other investors or to secure purchase financing, then the option of cooperation is inevitable. It is therefore all the more so in such situations important to establish clear barriers to cooperation, perhaps via SHA. However, we will focus on this in more detail in other separate works, as it is a complex topic.

3. Cooperation with business partners

Working with business partners, such as co-founders or industry allies, can be a strategic way to combine resources and expertise.

benefits: shared financial burden, shared expertise, diversified risk.

Disadvantages: potential conflicts in decision-making, shared gains and control.

Effective partnerships often it depends on clear agreements and strong mutual trust. It is essential to define roles, responsibilities and exit strategies from the outset. As we indicated above, we will deal with this in the next parts. So don't despair and keep an eye out for the sequel!

4. External investors

The involvement of external investors can bring significant capital and strategic benefits. If you are thinking about this variant, then it is necessary to know the individual types, the description of which will be greatly simplified for the purposes of this post.

• Capital Venture: Suitable for acquisitions with high and fast growth potential (especially for start-ups). VC investors offer capital and strategic guidance, but expect significant returns.
• Private equity: This option is ideal for larger acquisitions. PE firms bring significant capital and operational experience, but may require significant scrutiny and a clear exit strategy.
• Public equity: Issuing investment products on the capital markets can raise significant debt-free funds, but is associated with compliance with strict public law regulations, public scrutiny and an overall complex integration process and high entry costs.

benefits: access to significant capital, strategic support, risk sharing.

Disadvantages: ownership dilution, potential loss of control, high expectations for company performance.

5. Cooperation with the seller

You don't always want or can acquire a 100% stake in your dream company. Sometimes you just want to financially enter a company for a purpose evaluation of your investment. Other times you want long-term cooperate directly with the seller.

In principle, this option carries with it all the advantages, but also the disadvantages of cooperation with your business partners. Here, however, it is enhanced by the position of the seller, who is in a far more advantageous position than you for the further functioning of the company and it is mainly up to him to set the terms of cooperation.

In this variant, it is because extreme caution is required, so that as a result you only "play second fiddle" in the company, so to speak. This can be achieved with precise contractual terms and guarantees.

záver

Choosing the right acquisition approach is a critical step that affects every subsequent decision, from financing to integration. Whether you decide to go it alone, work with trusted business partners, bring in outside investors, or work directly with the seller, each option brings unique benefits and challenges. Understanding them will help you make strategic decisions that will align with your goals and maximize the potential of a successful acquisition.

In our next installment of the We Bought a Company series we will deal with different ways of financing. Continue to follow our series full of tips and advice to make your acquisition extremely successful!

Do you need advice or representation at purchase of the company? Do you have any questions about our series? Contact us! We have many years of experience in buying companies!

JUDr. Ing. Jan Vych, attorney and partner