The purchase price is usually the most visible part of an acquisition. It is rarely the only amount a buyer needs to fund, or the only factor determining whether the transaction works. The more useful question is what you must invest, manage and deliver from the first day of ownership. That requires a broader commercial assessment before negotiations become fixed around a single number.
Work out the total funding requirement
Alongside the purchase price, consider transaction costs, working capital, stock, immediate equipment needs and any planned investment after completion. Ask your financial adviser to distinguish amounts included in the agreed price from amounts you must provide separately. A business can be profitable on paper and still require cash to meet wages, suppliers and customer commitments during the transition.
A hypothetical buyer might budget carefully for the acquisition but overlook a seasonal cash shortfall immediately after taking over. That does not necessarily make the business unattractive. It changes the funding discussion and may affect the timing of completion, the working capital arrangements or the buyer's ability to deliver the growth plan that justified the purchase.
Test what you are relying on
List the assumptions behind your interest in the business. They might include recurring customers, a capable management team, a reliable lease, access to technology or the owner's personal relationships. Ask the appropriate advisers to investigate those assumptions. The commercial question is not simply whether a document exists, but whether the business can operate as expected under your ownership.
Avoid treating all diligence findings as equal. Some affect value, some require a condition to be satisfied, and others can be managed after completion. The legal, accounting and specialist advisers should explain their findings clearly enough for you to make decisions. An extensive report is useful only if its implications are understood and acted upon.
Negotiate the transition
Discuss what a successful handover looks like. Which customers require an introduction? Who will retain operational knowledge? What support is expected from the seller, and for how long? Set realistic expectations about availability and responsibilities. A broad promise that the seller will help when needed can mean very different things to the two parties.
Payment structure also deserves attention. Deferred consideration, retention arrangements and performance-linked payments may help bridge commercial differences, but each creates additional questions. Your advisers should assess the legal, financial and tax implications. Do not assume that delaying payment automatically resolves the underlying risk or that every structure is equally practical to administer.
Keep the acquisition case visible
As negotiations progress, revisit the reasons for buying. Has the expected return changed? Are you accepting responsibilities that were not included in your original assessment? Is the timetable forcing decisions before important information is available? A brief written acquisition case helps prevent momentum from replacing judgment, particularly when several people are giving advice from different perspectives.
Bring the current offer, funding assumptions and key diligence findings into one coordinated discussion. If you need help negotiating the commercial terms and keeping advisers and counterparties aligned, call Ardian Law on 02 8111 7700 to discuss your proposed acquisition.