If you are plan on acquiring a company using leveraged financed from a bank or private investors, it is likely that you will need a business plan. Pro Business Plans has worked with many acquirers to buy companies using third-party companies by preparing professional acquisition plans. This article provides information regarding what is included in an acquisition business plan and how it should be structured.
There are several things to consider when creating a custom business plan for an acquisition. Among the most important include the way that the company’s synergies are structured to reduce the risk and increase the valuation.
The historic performance of the acquired company must also be communicated, in order to clearly separate what the historic performance of the company was and its future projections based on the strategy of the acquirer.
The historic performance of the company needs to be presented in the most accurate form, using audited financial statements and a detailed description of the company’s operating structure. The historic performance of the company should not be combined with assumptions about the future in order to effectively separate empirical fact from forward looking assumptions. For instance, the plan may include information about the company’s historical product lines, but should provide information on future product lines or an expansion strategy within this section of the plan.
The acquisition strategy is the most important part of the business plan, as it is used to justify the financial projections for the valuation. The price of the company is often overvalued without factoring in synergies, so it is important to demonstrate how the company will increase the value after it has been acquired. Example synergies may include cost reductions in the supply chain due to increases in efficiencies, reduction in payroll expenses, or expertise from the management to control the company more efficiently.
The financial projections for an acquisition business plan are typically comprised of three main components. This includes three to five years of historic performance, five years of future performance including synergies, and the cost of capital. Banks will want to know that the company has factored in the cost of debt to determine the coverage ratio . Custom financial models may also be created in order to perform scenario analysis given key drives such as the growth rate, profit margin, and other factors.
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