In this blog, we are looking at how advisory services can support business founders with merger and acquisition deals.
How do interest rates affect acquisitions?
Clients working towards new acquisitions have the potential to see interest rate hikes, which can affect new acquisitions. Because higher inflation rates can lead to increased costs for goods and services, it can potentially affect the valuation of target companies and the financial projections for potential acquisitions.
Interest rate hikes can also impact the cost of financing an acquisition, making borrowing more expensive for buyers. As a result, some clients may become more cautious about pursuing acquisitions in the current economic environment, as it can increase uncertainty and risk.
What are the key drivers behind mergers and acquisitions in the UK?
There are five main drivers:
Companies often seek acquisitions to expand their market share, customer base, or geographic reach more rapidly than through organic growth alone.
Acquiring innovative startups or businesses with unique technologies or intellectual property can help larger companies to stay competitive and enhance their product or service offerings.
Synergies between businesses
Mergers and acquisitions can create synergies, such as cost savings through operational efficiencies, streamlined processes, and complementary capabilities.
Companies may acquire other businesses in order to diversify their revenue streams and reduce dependence on a single market or product line.
Mergers and acquisitions can also be driven by the desire to consolidate industries, leading to a smaller number of larger players.
What are the advisory services accountancy firms can offer founders to support them with merger and acquisition activity?
Advisory services can help clients to gain a deeper understanding of the potential risks and rewards associated with an acquisition, enabling more informed decision-making. It can also lead to improved deal terms, where proper valuation and negotiation support can lead to more favourable deal terms and pricing, ensuring clients don’t overpay for the acquisition.
Let’s look at this in a little more detail:
Helping founders determine the fair value of their business or the target company, considering financial performance, market conditions, and industry benchmarks.
Due diligence support
Assisting founders in conducting comprehensive due diligence on potential acquisition targets to identify risks, opportunities, and potential deal-breakers.
Financial modelling and analysis
Creating financial models to assess the impact of the acquisition on the acquirer’s financials and to evaluate various scenarios.
Advising on tax-efficient structures for the acquisition to minimise tax liabilities.
Providing guidance during negotiations with the target company to ensure a favourable deal for the founder.
What’s technologies place in Merger and acquisitions?
Technology helps accountancy firms support clients with merger and acquisition activity through advanced data analytics tools – which can assist in conducting due diligence more efficiently, identifying patterns, and spotting potential issues in financials or operations.
Technology also enables seamless communication and collaboration between different teams and stakeholders involved in the process, even if they are geographically dispersed. One example of this would be secure virtual data rooms, which allow for the secure exchange and storage of confidential documents during the due diligence process.
Technology also aids in creating complex financial models and running simulations to assess the impact of various scenarios and assist in navigating complex regulatory frameworks and compliance requirements related to merger and acquisition transactions.
ABOUT COUNTING KING
Counting King is a national tax and funding practice that helps companies with their cash flow by sourcing grants, utilising government tax incentives or finance options such as business loans and more to help them scale and grow!
We focus on innovative companies who are seeking to expand and disrupt their respective industries which in turn will help the UK become a global leader and strengthen our economy.
If you would like advice from one of our specialists, please contact us via email at firstname.lastname@example.org or call us on 0800 8100 030.