Introductions etc

2. Introductions etc • Expectations • Programme background • Social enterprise / Social Firms • Our interest • Lessons from Australia • Programme outcomes • Lottery funded 3½yr programme to: • Increase knowledge of acquisition in Third Sector • Create 8 – 10 Social Firms through acquisition • Support potential purchasers from “just interested in the possibility of acquiring a business” to “we've got a target company in mind”.

3. Failure • “significant body of research has found that most acquisitions fail to achieve their original stakeholders” • Why acquisitions fail: • Process failures • Lack of expertise and time • Logic/commercial failures • Inadequate information about the target • Target's environment/industry changed • Unfamiliarity with target's industry • Overestimation of market potential • Acquisitions of the “wrong” company

4. Successful acquisitions • 6 Keys of success • Synergy evaluation • Integration project planning • Due diligence • Selecting the management team • Resolving cultural issues • Communications with employees (especially the buyer)‏

5. Key Acquisition Questions • Why are you buying? • What are you buying? • When are you buying it? • How much are you paying? • How are you going to pay? • How are you going to make it work?

6. Programme • “Getting ready to buy” workshops • Access to pre-selected professional advisers • Use of proforma documents to save time & money • “Doing the deal” seminars • Working with Scottish Family Business Association and finding other potential sellers • Single portal with information on funding, SROI, structures and appropriate support • Free deal flow project management for pre-approved transactions • Online deal forum

7. Programme • Reduce risk by comprehensive support package and robust process • Save time and money through: • Consistent starting point of documentation • Selection of professional advisers who know the sector and the programme • Deal flow project management • Deal room in the online forum • Sellers being supported and buying into social enterprise • Strong links with funding and finance providers to work around timing constraints and bridging requirements • Support for the conversion in a Social Firm

8. Partners • Forth Sector • Inspiring Scotland • MacRoberts • Ledingham Chalmers • Morton Fraser • Pilotlight • RBS • Scott Moncrief • Scottish Government • Senscot • SSEC • Triodos • Shepherd + Wedderburn • Baker Tilly • Big Lottery Fund • Brodies • BTO • CEIS • McGrigors • DTAS • Chambers of Commerce • Eriskay Associates • Scottish Family Business Ass. • Social Investment Scotland • Cranfield Trust

9. Process Acquiring business 4 good programme support from Social Firms Scotland Intermediary support from programme stakeholders Professional advisers

10. Acquisition Criteria • Industry • Size • Location • Products and services • Personnel (knowledge and skills)‏ • Profitability • Assets • Price range • Resources required to complete the deal

11. Forum

12. Due diligence • Wide ranging investigations in a variety of financial/commercial transactions • Why is it important? • Stronger negotiating position • Reduce risk • Loss of the deal through failure to identify “deal breakers” at an early stage • Failure to identify contingent liabilities • Failures to identify overstated profits or assets • Acquisition of outdated technology • Loss of legal tax-avoidance opportunities • Prepare for integration

13. Money • Valuation • Asset based • Turnover based • Enterprise value (combination)‏ • Industry average • Value vs What you will pay • Funding • Cash consideration • Lump sum pension contributions • Service and consultancy agreements • Earn-outs • Delayed or partial sale

14. Funding and finance • Business plan • Due diligence • Acquisition • Refinancing the business • Integration and conversion costs

15. Questions and wrap up

16. Growth Models and Strategies Capacity Riskiest Risky Riskier Startup Acquisition Replication – Owner Replication – Buyer Joint Venture Lead contractor Subcontractor Externalisation