Buy-Side Advisory: Acquiring a Company

Buy-side advisory is professional support for a company that wants to acquire another, covering strategy, target search, valuation, due diligence and negotiation. Hector Kurumsal focuses on finding the right target, reflecting risks in price and contract, and building an integration plan that protects the value acquired, in coordination with your legal and tax advisers.

An acquisition is not a single moment of signing; it is a process spread over months. Its outcome is usually determined less by the time spent at the negotiating table than by the quality of the preparation before it.

Acquisition strategy: what are you buying and why?

A good acquisition begins not by catching an opportunity but by defining an objective. The aim may be a new market, a new product, scale, talent, control of the supply chain or consolidation; each calls for a different target profile. Once the strategy is written down, it becomes clear which proposals deserve attention and which are distractions.

How targets are screened and selected

Target screening starts with knowing your criteria. The following headings typically form the backbone of the list.

• Sector, product and customer structure, and fit with the purpose of the acquisition
• Size and financial profile: revenue, profitability, cash generation, leverage
• Geography and operating infrastructure
• Ownership structure and the owner's readiness to sell
• Continuity of the management team and key employees
• Cultural fit and integration difficulty

Companies that meet the criteria are listed, screened using public information, and the best candidates are approached in confidence. The manner of that first approach matters: a wrong approach can lead the seller to close the door or raise the price. Understanding how the owner of a Turkish family company thinks and speaks makes a difference here, particularly for foreign buyers.

Valuation and synergy

The value of the target is set as a range by weighing discounted cash flow, market multiples and asset-based approaches together. For a buyer, the second and often more important question is how much value this company will generate in our hands.

Synergies such as revenue growth, cost savings or capability transfer can be real, but how much will materialise is uncertain. As a rule, all of the synergy is not paid to the seller; if it is, nothing is left for the buyer to earn. Synergy assumptions should therefore be written down, measurable and conservative.

Due diligence: scope and red flags

Due diligence forms the basis of the acquisition decision. Its purpose is not to “approve” the company but to see the facts that affect price and contract.

Some findings call for special attention. The main red flags are:

• An unexplained gap between financial statements and actual cash flow
• Heavy dependence on a single customer or supplier
• Relationships and knowledge held personally by the owner
• Undocumented transactions or unresolved tax audits
• Pending or potential litigation and regulatory reviews
• Risk of key employees leaving
• Reluctance or inconsistency in providing data

Findings are treated not as a barrier to the deal but as input for negotiation and for designing protections. The legal and tax aspects of the review are carried out together with the relevant advisers.

Deal structure: shares or assets?

In a share purchase the company is acquired with its entire history: contracts, permits and employees stay in place, but hidden liabilities pass to the buyer as well. In an asset purchase the buyer chooses what to take, but each asset, contract and permit needs separate transfer, and special procedures apply for employees. Mergers are subject to the procedures in the Turkish Commercial Code (Law No. 6102). The choice is made by weighing risk profile, tax consequences and operational requirements together.

Negotiation and contractual protections

Negotiation is not only price bargaining. The main mechanisms that protect the buyer in a share purchase agreement (SPA) are:

• Representations and warranties: the seller's commitments about the condition of the company
• Indemnities: the buyer's remedies if the warranties prove untrue
• Price adjustment mechanisms: adjusting the price at closing for debt, cash and working capital
• Deferred payment and security: holding back part of the payment for a period
• Earn-out: a way of sharing uncertainty over value
• Conditions precedent: the deal does not close until approvals and third-party consents are in place
• Non-compete and non-solicitation: preventing the seller from competing in the short term

The scope of these provisions varies from deal to deal and is set with your legal adviser. Our role is to weigh with you, from a commercial perspective, which risk is covered by which protection.

Approvals and closing

Before closing, corporate resolutions and, where required, approvals from the Competition Authority and sector regulators must be obtained. The timing and scope of these approvals depend on the structure of the deal, and the timetable must be built accordingly. For listed companies, Capital Markets Board (SPK) rules are also taken into account.

Post-merger integration: the first hundred days

The period in which acquired value is actually created is the months after signing. Many buyers tie this period to a plan called the first hundred days. The plan typically covers:

• Clarifying management and decision rights
• Communication to employees, customers and suppliers
• Combining financial reporting and control frameworks
• Integration of systems, processes and supply chain
• Assigning owners and timelines to synergy targets
• Retaining key employees

Common mistakes in acquisitions

• Chasing opportunities without a strategy: evaluating every company that comes along wastes time and can lead to the wrong acquisition.
• Overpaying for synergy: paying in advance for a gain that has not yet materialised wipes out the buyer's return.
• Treating due diligence as a formality: the review is the only real source of information for price and contract.
• Underestimating dependence on the owner: a company whose customer relationships sit with the owner can lose value when the owner leaves.
• Ignoring cultural differences: integration fails most often on people, not numbers.
• Assuming approvals will be quick: if the timetable for required approvals is not anticipated, closing slips and trust between the parties weakens.

What Hector does in an acquisition

• Writes down the acquisition strategy and target criteria with you
• Screens targets and makes confidential first approaches
• Carries out valuation and synergy assessment
• Conducts financial and operational due diligence and coordinates legal and tax reviews with the relevant advisers
• Sets negotiation strategy and organises meetings
• Helps build the post-merger integration plan

To define your acquisition criteria together, contact us. The initial conversation is held in confidence.