How to avoid mistakes when acquiring a company
Acquiring a company is a moment when emotions often win over cold calculation. At Senat Biznesu, we have observed for 8 years how small oversights in agreements lead to losses reaching tens of thousands of PLN even before real management begins.
Lack of verification of hidden liabilities
Most investors focus on current revenues, completely ignoring ledger entries regarding off-balance sheet liabilities. We saw a case from Q2 2023 where a new owner acquired a company with underestimated deferred payments to suppliers in the amount of 47,000 PLN. This was not an accounting error, but a deliberate hiding of cost invoices by the previous manager.
The rules are as clear as our strategy: every audit before a transaction must include verification of account statements for the last 24 months. If the seller refuses access to invoice history, it usually means there is something to hide. No beating around the bush – if you do not see full documentation, withdraw from talks before paying the deposit.
If you do not see full documentation, withdraw from talks before paying the deposit.
Issues with employee documentation
Acquiring a limited liability company, you become an employer for the entire team. A common mistake is assuming that employment status is settled. During an audit at a manufacturing company near Lublin last year, we discovered 12 incorrectly terminated mandate contracts, which carried the risk of a ZUS penalty of nearly 18,500 PLN.
We operate where stability counts. Always check not only employment contracts but also personnel files and OHS training history. If an employee does not have a valid certificate, the first cost you will incur after acquiring the company will be a penalty from the labor inspectorate.
Ignoring lease agreement clauses
A company's headquarters is often its greatest asset, especially when located in city centers. Many investors skip the issue of lease agreement annexes that may expire within 6 months of the transaction date. In one of our 2024 projects, a client almost lost access to a warehouse because they did not verify the right of first refusal clause for the premises.
We focus on hard data. Read every page of the lease agreement, especially the attachments written in smaller print. Sometimes that is where clauses regarding contractual penalties for changing the entity's owner are hidden, which can effectively block your new company's financial liquidity.
Underestimating the costs of implementing control systems
Acquiring a company requires the immediate implementation of your own management standards. Many investors assume that old processes will work unchanged for another half year. That is a mistake. Implementing a simple daily reporting system costs about 3,200 PLN, but allows for catching losses at the level of 1,500 PLN per month starting from the second week of work.
Do not wait for the so-called adaptation period. Establish collaboration rules with the accounting and sales departments in the first 7 days. A lack of clear guidelines for the acquired team always results in a performance drop of 15-20% in the first quarter.
Lack of clear guidelines for the acquired team always results in a performance drop.
