Don’t be afraid to walk away from an acquisition. Here are four key questions to think about…

By December 12, 2016February 18th, 2021For Business

Music streaming service Spotify has abandoned its bid to takeover rival platform SoundCloud after months of talks, TechCrunch reports, citing a source familiar with the discussions.
In September, the Financial Times reported the two European firms were in advanced talks over an acquisition. TechCrunch now reports that the discussions ended because Spotify feared the deal would have a negative impact as it moves towards an initial public offering (IPO).
Numerous media reports have suggested that Spotify is poised to float next year though the company has not officially confirmed this.

I can’t stress how important the due diligence is. I have no hesitation in calling a deal “a dud deal” when the due diligence and figures don’t stack, and neither should you.I’ve found that successful acquirers view due diligence as much more than an exercise in verifying data. Due diligence dissects a business, reveals strengths and weaknesses and exposes unreliable assumptions that may affect the the end price. I’m happy to talk through the due diligence process in more detail but as a starter, you should focus on four basic questions:1. What are we buying?2. What is the target’s stand-alone value?3. Where are the synergies—and the skeletons?4. What’s our walk-away price?Know your key rationale rather than deal fever and a momentum to just close the deal.

Julian Bond

Author Julian Bond

Julian is head of our corporate department and has practiced law for 30 years. He is highly experienced in advising a wide variety of business on anything from business formation through to multi-million pound deals.

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