Simultaneous Acquisitions?

October 06, 2021

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Hello all. I'm looking at two separate opportunities (both brokered) to buy businesses in the same small-ish city that I believe would be quite complementary (though they do not compete with each other). Both opportunities are pre-LOI. I'm trying to consider the prospect of buying both companies at the same time. I'd be financing both deals with SBA loan(s). I had a few questions on which I'd appreciate any insight:

1) Is this a dumb idea? I have not acquired a business before and don't have industry experience, though both business models are fairly simple.

2) Should I assume the brokers/banks/sellers will be resistant to this idea for reasons of complexity/ability to focus on the acquired firm/staff retention/etc.?

3) Is running concurrent due diligence processes for two businesses unrealistic for a self-funded searcher?

4) I'm assuming that I should disclose my intentions prior to the signing of the LOI, even though I would not condition one deal on the successful completion of the other (in other words, if due diligence kicked up a dealbreaker for Company A, I'd still want to buy Company B). Is that the right approach?

Thanks in advance.

Reply by a professional
from Harvard University in Atlanta, GA, USA

The other side of this is that you're not guaranteed that either deal will sign your LOI and then there is no guarantee that both companies will make 100% through diligence. The challenge - and this happened to me - is how you manage the two processes. I would not share that I was doing both deals as it causes brokers and sellers to have concern (what happens if the other deal doesn't close - will they still buy me?). I'd keep both deals going as far as you can. ^redacted‌'s comments are correct though. If you are successful with LOI signed on both, diligence completed on both, SBA loans underwritten for both - I think you then have to decide can you run them both? But I'd keep both in play because many deals fall out! (out of 44 clients we've had this year, around 15 fell out during LOI negotiations and 7 fell out after the signed LOI and we were in diligence. (meaning: I could have had 15+7=22 more clients but their deals didn't work out)

Reply by a searcher
from Rice University in Katy, TX, USA

I would look at the post acquisition work load on both deals to evaluate a decision. Say one company takes###-###-#### hrs in a week to get things done, you will be stretched to manage the other company.

If one deal has more growth opportunity with little sales improvement, minor tweaks, i would go in that route.

If both companies are having a well run middle management and a general manager in place, and you provide oversight, this idea of closing 2 business might work.

There is no issue in having 2 LOI. Since LOI is non binding agreement, until the closing both parties have the option to honor it or terminate,

SBA requires personal guarantee. How 2 loans are going to have one property as PG might be an issue unless you have multiple properties.

Being self funded the cost of doing legal, dd, etc on both deal simultaneously also considered.

+2 more replies.

Join the discussion