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Six factors to consider during a business acquisition

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Owning and operating a Florida business is a major task that requires many serious business changes to be made. Whether a business is large or small, the idea of expanding a business is often on the top of the list for many companies. This is where acquiring another business could be a very lucrative step to take; however, it is a major business decision that requires much planning and preparation.

While a merger is the process in which two companies come together to form one single entity, and acquisition is when a company takes over another company. Typically, a larger company will take over a smaller company. Though, it could be the other way around. The main reason to initiate the acquisition process is to expand and consolidate the business operations of a company.

When initiating and moving forward with the acquisition process, there are six key factors to keep in mind. First, it is vital to appoint a financial advisor. This person assists with the entire process by valuing the company and scouting out other companies to negotiate. Next, a non-disclosure agreement should be drafted and signed by the companies involved in the matter. This helps protect the process and limits or eliminates the disclosure of information regarding the acquisition.

Third, term sheets and a letter of intent should be executed. The letter of intent expresses the interest of one company, while the term sheet outlines the terms of the deal.

A fourth factor to keep in mind is due diligence. This means taking the time to understand the information involved in the process, analyzing it and considering any potential issues that could arise.

Next, negotiations should occur, which often entails drafting a final agreement. This document addresses all issues and needs of the parties involved. And, the sixth and final factor to consider in the process, is the closing phase. This include the signing of the final agreement and executing the terms of the signed agreement.