8/13/2019 Some Things You Need to Know About Acquisition
Financing
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Topic : Acquisition FinancingKeyword : acquisition financing
Some Things You Need to Know About Acquisition Financing
One of the common approaches for most companies in order to
secure their market position is
making strategic mergers or takeoers through acquisition
financing! This is because it is anestab"ished fact that it wou"d
be much cheaper in the "ong run to #ust merge with$ or
acquire$another company than to create an entire"y different entity
haing the same business actiities
of the company to be acquired! %n fact$ mergers and acquisitions
are often iewed as a shrewd
strategic moe that wi"" benefit the purchasing company in the
"ong run!
&hi"e it is true that acquisition financing is made aai"ab"e
by banks$ financia" institutions$ andenture capita"ists$ the
purchasing company has to present a so"id business p"an$ both
for
itse"f and the acquired company! This is to aoid any acquisition
fai"ure$ which can resu"t frommisp"aced priorities and hapha'ard
business p"ans! One of the common mistakes of purchasing
companies is going into acquisitions not because of its
strategic importance$ but ratherbecause of the "ow price! This type
of rationa"e a"ways "eads to fai"ure!
This is why if your company is p"anning to app"y for acquisition
financing$ you hae to makesure that the company or business
interest that you are going to acquire has the propensity
toincrease your own company(s market position and financia"
standing! Natura""y$ the company
or business interest that you are going to acquire must fue"
further growth for your owncompany$ not sadd"e it with burdensome
prob"ems! The perceied momentous growth of your
own company in the future once the merger or acquisition is
done$ is an important aspect thatmost banks and financia"
institutions usua""y "ook for!
One of the most attractie factors that wou"d usua""y bag you an
acquisition financing package
is the strategic bri""iance of a so"id business p"an! Among
other aspects$ your strategicbusiness p"an must i""ustrate that the
combined operations of your company and acquired
company wi"" further increase your market share and at the same
time$ improe your cash
f"ow! This wou"d definite"y arouse the interest of banks and
financia" institutions who wou"dperhaps scramb"e to be the first to
offer you an acquisition financing package!
Natura""y$ aside from a good business p"an required to aai" of
acquisition financing$ your
company must a"so hae a good cash f"ow history! &ith regards
to the acquired company orbusiness interest$ some banks and
financia" institutions a"so require their own cash f"ow
history! The purchasing company must a"so hae e)pert management
teams that are ready to
take oer the reins of the acquired company! This is to make sure
po"icies after the acquisitionis proper"y a"igned with the
ob#ecties of the business p"an!
Other aspects that a purchasing company must consider are the
qua"ity of the soon*to*be*
acquired company$ the condition of its assets$ and its
outstanding financia" ob"igations! Oncea"" these things hae been
arranged in the proper perspectie$ the probabi"ity of getting
an
acquisition financing wi"" be higher!
