If it’s determined that an acquisition led growth strategy is appropriate and target(s) are identified, then maximising the chances of delivering the deal becomes the priority. To avoid expensive aborted deal costs and wasted management time it is crucial that all internal hurdles are cleared (and any challenges met) and the board are galvanised behind a shared M&A vision.
At this point boards can benefit from making their strategic priorities known to their advisors, who can then identify, source and bring opportunities to them, ensuring that they don’t miss out, given the confidential nature of much M&A activity.
The funding proposition equally needs to be clear and if debt is being raised externally, conversations with banks need to start early. Housing associations need not be overly concerned on this point; whilst there are constraints on debt funding, financing should be available for good quality businesses to support a well structured strategic plan. Furthermore, although not the subject of this article, there are many options for alternative sources of funding such as retail bonds, public bonds and private placements.
Many transactions will require approval from the HCA, the social housing regulator, so early consultation to understand its position would be appropriate.
With the internal preparations completed, the focus should be on execution. Careful and detailed project management, led by a senior executive and supported by an experienced corporate finance advisor should minimise time in the market and seal the deal. Our experience shows that, on average, a transaction will take at least four to six months to complete. A lengthy transaction process risks seriously interrupting the existing business by focussing executive time and energy on the deal.
Due diligence is a key part of the deal preparation, helping, as it does, to objectively challenge any assumptions built into a planned acquisition and, as a result, offering reassurance, to both the purchaser, and in some cases its funder, that the acquisition stacks up.
Of course there is also the matter of costs to be considered which are very deal specific, but can be relatively more onerous at the smaller end of the market as corporate finance, tax, due diligence and legal advice should be sought in relation to most transactions and of course there can be funding costs incurred if finance is raised.