Powerful Acquisitions: The Art of Saying 'No'

Thorough Preparation

Prepare well before you start reaching out, and preferably consider multiple companies, Caspár’s main advice goes. “Buying is (sometimes) the art of saying no. When you have a clear idea of what you’re looking for, you can say ‘no’ faster and more confidently — even before entering the costly analysis phase. In any case, it’s wise not to let an acquisition process drag on unnecessarily.”

Initial Screening

Once you have compiled a list of interesting acquisition candidates — whether with the help of an external advisor or not — it’s time for a first external screening, Caspár explains. “Often, you can learn a lot just by carefully studying a company’s website or searching online. What type of company is it? What does the building look like? How large is the team? And who are their customers?”

At this stage, the Chamber of Commerce (KvK) can also provide useful information. The KvK offers basic financial data as well as details about the shareholder structure and the age of the shareholder(s). Sometimes, you can even infer from this whether a son or daughter might be ready to take over, or whether the entrepreneur is open to a sale at all.

Anonymous Approach

Next comes the first contact with the target company, Caspár says. “Of course, you could simply pick up the phone, but then your identity is immediately known. Many buyers therefore choose to express their interest anonymously, for example through an external advisor. This also shows from the start that you are a serious party.”

The target company often appreciates this discreet approach as well; if employees catch wind that another company is interested in a takeover, it can cause unrest — which you naturally want to avoid. That’s why we usually send a letter on behalf of the buyer, on our own letterhead, to their private address.”

Sufficient Common Ground?

Is the acquisition candidate open to a conversation? Then it’s time for an initial meeting. It can be useful to visit the company outside office hours, for example if it’s a manufacturing business with an extensive machine park. However, such meetings often take place on neutral ground.

Crucial financial information — such as annual accounts and margin calculations — is usually not shared at this stage, Caspár explains. “The first meeting is mainly to get acquainted and determine if there’s enough common ground to explore a takeover. You can try to get a better understanding of the team composition, the role of the owner-manager (DGA), the size and profitability of the company, the relationship with and dependency on customers and suppliers, and the company culture.”

Exclusivity

If there is sufficient basis to proceed after this initial phase, it’s time to make further agreements in the form of a so-called letter of commitment. “What does the follow-up process look like? And what agreements do you make about confidentiality? Ideally, you also arrange exclusivity at this stage. As a buyer, you will incur significant costs for deeper analysis, valuation, and preparing a well-founded offer.”

Analyses

Next, we send a first questionnaire for analysis, focusing on quantitative data such as financials. “But we also collect qualitative information to fully understand the story behind the numbers. What opportunities exist to strengthen the market position? And how is the company managed?”

The role of the owner-manager (DGA) is also examined. Especially in smaller companies, the DGA is often a key figure with whom employees feel closely connected. Furthermore, company culture plays a crucial role. For a successful acquisition, it’s essential that the cultures of buyer and target align well.

Valuation and Offer

Based on the information received, an indicative valuation is carried out. This is followed by advice on the offer price and structure. It’s also important to consider whether the buyer can finance the purchase price — through equity, bank financing, and/or possibly a subordinated loan.

“If all signals are green, it’s time to submit the offer, including additional conditions. This might involve a transition period for the DGA and the potential acquisition or lease of the company premises. If your offer is based on specific assumptions, include these so they can be further examined in the next phase.”

Negotiation Phase

After submitting the indicative offer, the negotiation phase begins. Once there’s agreement on the main transaction terms, this is recorded in a letter of intent. After signing, the closing phase follows: arranging transaction financing, final contracts, and a due diligence audit.

“This audit verifies whether all the information you received earlier — and on which your offer was based — is accurate. You can also outsource the coordination of this process to an external party, which has a network of legal advisors, accountants, and tax specialists to provide support.”

Financing Application

Among other practical matters, you arrange transaction financing during the closing phase. Caspár emphasizes that it’s wise to involve an external advisor here as well. “In my opinion, you should submit a strong financing application in one go. When we prepare a well-founded and comprehensive financing memorandum, it significantly increases the chances of successful transaction financing.”

The New Owner

Has the due diligence been completed to your satisfaction? Then you proceed with the agreements from the letter of intent, possibly after final negotiations on the details. Next, it’s time to prepare the transaction documents.

At the notary’s office, everything is signed and the funds are transferred to the seller. Traditionally, this is the moment to raise a glass of champagne and congratulate each other. From now on, you may proudly call yourself the new owner.

Curious about your opportunities to acquire a business? Feel free to get in direct contact with Caspár Bijleveld.

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