The riskiest phase of an acquisition begins after the signature.
Succession processes rightly devote intensive discussion to valuation, structure, tax and warranties, because substantial amounts are at stake. What is regularly neglected is the first 24 months after completion.
That is when three burdens converge. First, acquisition financing ties up cash flow and claims collateral. Second, an investment backlog has accumulated because the seller understandably did not address it during the final years; nobody modernises immediately before a sale when the buyer receives the benefit. Third, a new leadership team is settling in while employees, customers and suppliers assess the new situation and some reconsider their choices.
During this phase, postponed decisions arrive together: machines at the end of their useful life, an ageing fleet, unsupported IT systems and integration of a second site. If they must be financed through the same credit line as the purchase price, the new owner quickly faces a choice between foregoing investment and stretching liquidity. Both are poor starts, particularly when the new owner needs to demonstrate the ability to act.
Switzerland faces a significant number of upcoming succession arrangements, many involving businesses with substantial fixed assets. [Evidence: current succession study, for example by Bisnode/Dun & Bradstreet or Credit Suisse] This is not a niche issue but a structural challenge for the coming years.
The practical principle is that investment planning for the first two years belongs in due diligence, not in the period afterwards. Financing those investments should be considered separately from transaction financing. Asset-based financing does not place additional strain on the acquisition structure because it is aligned with the asset and its use.
This also changes negotiations. Anyone who has quantified the investment need can argue about the purchase price with figures rather than feelings.
A successor acquires a business and leases new equipment without placing further strain on the acquisition financing.
For anyone currently valuing a business: have you quantified the investment backlog, or only the purchase price?