Three Benefits of Preparing a Business Impact Assessment After Purchasing Another Company

In the fast-paced and ever-evolving landscape of the business world, purchasing other businesses has become commonplace. However, while many business owners believe negotiating a business purchase is the hardest step, most challenges and opportunities often emerge after the acquisition. A well-executed business impact assessment (BIA) (or a business impact analysis report) can give you a deeper understanding of the challenges and potential next steps following a business purchase. This article will explore three key benefits of preparing a BIA following the acquisition of a UK business.

1. Spotting and Managing Risks 

One of the most valuable aspects of conducting a BIA is its unparalleled ability to unveil potential risks that may arise following a purchase. Every business deal inherently carries risks, including:

• financial uncertainties;
• operational challenges; and
• regulatory compliance issues.  

A BIA can help you proactively anticipate potential issues and devise strategies to address them. This form of business risk assessment can help you uncover: 

• hidden financial liability;
• tax implications;
• legal issues; and 
• brand reputation risks.

For example, a BIA can help a potential purchaser identify financial instability within the target business. Accordingly, they can take preliminary steps to solve these issues immediately upon purchase. Alternatively, uncovering potential legal and financial risks could help renegotiate the purchase price.

In this way, a BIA can act as a safety net. It enables you to navigate potential obstacles by identifying them early and pre-planning their solution before any formal business purchase.

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2. Understanding Internal Culture

It is crucial to fully understand a UK business’s culture and core values before purchasing it. Many prospective business owners wish to understand the collective spirit and morale of the workforce and management before a business acquisition.

New company ownership comes with potential challenges, such as:

• disagreements between employees; and
• confusion regarding the nature of business operations and functions.

A well-executed BIA can help you understand the working culture of the target company. Consequently, you can understand the core values driving the business and avoid changing too much too quickly.

This knowledge can help you understand the strengths and weaknesses within the management and staffing structure of the acquired company so only thoughtful and necessary changes are implemented. In this way, a BIA can foster employee satisfaction and reduce the likelihood of high staff turnover and unnecessary business disruptions.

3. Appeasing Relevant Stakeholders

The main stakeholders within the acquired business will benefit from the knowledge that the business will not suddenly change beyond recognition overnight. These stakeholders include: 

• employees;
• customers;
• suppliers; and 
• investors.

Maintaining business continuity and good levels of communication with these diverse stakeholders is essential, as it fosters trust, ensures operational stability, and safeguards the business relationships that underpin the business’s success.

Good business continuity planning can systematically analyse how the acquisition will impact each unique stakeholder group. A good BIA can go beyond the surface-level analysis and delve into the nuances of their expectations, concerns, and aspirations. This information can help you develop tailored communication plans and ensure that each group receives coherent messages that reassure them.

Naturally, being transparent and upfront with stakeholders is an excellent idea to generate goodwill and protect critical business processes.

Key Takeaways

In conclusion, a thorough Business Impact Assessment is a critical step to lay the groundwork for a more seamless purchase process. The BIA can serve not just as a shield against potential risks but also as a guide for engaging with stakeholders and protecting incoming business revenue.

A Business Impact Assessment is a practical risk management step that can help you spot and manage risks, such as having disaster recovery steps to mitigate natural disasters, finding the best ways to incorporate your ownership of the new business, and keeping everyone informed. Naturally, many prospective business owners obtain expert legal advice to ensure the business impact analysis process covers the relevant issues.

If you need legal assistance preparing a Business Impact Assessment, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.