Food For Thought? What Acquisitive Businesses Can Learn from the Great British Bake Off Fiasco
Mergers & Acquisitions
Claire Januszewski - Copywriter | October 26th 2016More articles by Claire Januszewski
Updated: 26th October 2016
When people think of running a company, they often imagine starting their own business from scratch. However acquiring an existing business could be an alternative route to success for many business owners. An established customer base, a set of employees who are familiar with how to run the business, and a solid cash flow, can make this a less risky proposition than starting a brand new company.
However acquiring an established business is not necessarily a one way street to guaranteed success, and there are certain potential pitfalls inherent in going down this route which should be navigated carefully. Implementing a due diligence process can help to mitigate these risks and provide you with the reassurance that you are making the best move for yourself and also for the company you are purchasing. Due diligence is essentially a thorough audit of the company undertaken by a prospective buyer to evaluate, among other things, the assets, liabilities and legal position of the business.
When acquiring a company, firstly you should ensure you know what is included in the sale so you know exactly what you are buying. Secondly you should bear in mind that while you may be thrilled about your new acquisition, this does not mean that everyone else connected with the company will necessarily share your enthusiasm. This could lead to you facing the wrath of disgruntled employees and customers who are unhappy with the change.
This was the situation Channel 4 experienced with when they purchased the rights to the popular BBC show the Great British Bake Off over the summer; a move which served to alienate both the presenters of the programme and also the loyal audience. The initial announcement following the £75m acquisition led to uproar among viewers, who voiced their concerns over how the changes may affect the show. This was swiftly followed by a statement confirming that the show’s presenting duo, Mel and Sue, were ‘not going with the dough’ and would instead be staying with the BBC. Mary Berry announced shortly after that she too would not be returning to the famous tent once it moves over to the rival channel. Channel 4 has managed to entice Paul Hollywood over, making him the only remaining figure from the current successful line-up.
This then begs the question, if the three of the four integral elements of the show were not included in the sale, then what have Channel 4 actually bought? Have they, as some have mockingly suggested, essentially spent £75m on a tent? While Channel 4 has secured the rights to an extremely popular programme, in the process they may have lost the things which were at the very heart of the show’s success. Whether Channel 4 still has the same recipe for success with 75% of the key ingredients missing, remains to be seen.
This is a prime example of why extensive due diligence is absolutely crucial when it comes to the acquisition of a company. It is essential to know exactly what your money is (and just as importantly, is not) buying you. Due diligence will allow you to confirm legal ownership of all the assets which are integral to the success of the company, including property, equipment, vehicles and even intellectual property such as patents and copyright.
Due diligence goes further than just looking at assets however, it also examines the financial and legal position of the company, along with the processes currently adopted in areas such as production and marketing, and the information systems used. It also considers environmental factors which could affect the company in the future, such as any imminent changes in the wider legal or political landscape, and also more specifically any changes planned within the sector the company operates in.
While this comprehensive audit takes times, it is a vital step in the purchasing process and ensures you know exactly what you are getting yourself in to before committing. If the Great British Bake Off fiasco has taught us anything, it is that you should not do a deal in haste just to pin it down, without first ironing out any niggles. Due diligence will allow you to make a logical decision based on accurate information, rather than discovering later on that your idea of what you were buying was in fact half-baked.
About the author
Claire is a copywriter working within the digital content team at Begbies Traynor. Her areas of expertise are business insolvency and all areas of personal finance. She has written for a variety of online and print publications, and her work has been published in a number of national newspapers, including the Daily Mail, the Daily Telegraph, and the Daily Express.