A. James Bradney writes:
Be confident of your own position of strength before proceeding. If you operate in a particularly volatile sector, where changes to clients’ budgets and spending criteria can happen quickly, it can be risky. Your strategy could easily be adversely affected at a crucial point of implementation by unexpected changes in direction by a third party whose actions are beyond your control or influence. It is, therefore, imperative to understand the potential impact of the recession on your own business. For example, do you have the financial reserves to weather the storm as well as fund the acquisition? And, would a failure of the plan be detrimental to your own business by adversely affecting existing client relationships?
Assuming you’ve done your homework and are confident of working through these scenarios, there are three approaches you could take. First, there’s the direct route, which is likely to work best if you position your proposal as an offer of help and support rather than a hostile takeover. You may be rebuffed, but assuming your target is open to discussions, this is an excellent means of gathering additional information about the business that will help you to properly assess the viability of your plan and gain an understanding of likely timelines.
Alternatively, you could make direct approaches to key members of staff and/or clients of the target. But remember that both may be contractually bound to your competitor, and you may need to take legal advice over any potential liabilities you could face if you encourage them to break these contracts. The effect of this approach would be to unsettle and destabilise the relationships within the target business and potentially weaken it further, making it more susceptible to a takeover.
Finally, you could wait and negotiate a purchase of the business and assets from any administrator or liquidator appointed if the company becomes formally insolvent. The disadvantage here is that unless you are in a position to act quickly to preserve the business, significant value may be lost.
James Bradney is a founding partner of Bridge Business Recovery, and has extensive experience in dealing with all corporate insolvency matters.
www.bridgebr.co.uk