Growing your business through acquisition – 5 legal and commercial considerations

July 8, 2025

Growing your business through acquisition – 5 legal and commercial considerations

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By Siobhan Williams

Growing your business through acquisition can provide you with strategic business advantages, from rapid market access to gaining existing customer relationships.

However, it is important to note that these benefits require careful planning not only around why and how you intend to grow, but also how the acquisition will be funded and executed.

In this article, our M&A solicitor, Siobhan, examines 5 key legal and commercial considerations for financing your growth ambitions, alongside practical strategies for executing a successful acquisition.

1. Define your growth goals early on

Before making any moves, it’s critical to define your growth goals. Are you aiming to acquire market share, secure a key supplier or asset, gain a new distribution channel, or acquire a particular talent pool or technology?

Having clarity on your objectives helps shape:

• Which businesses are suitable targets
• Your risk appetite for the acquisition
• Negotiation flexibility (e.g. where you are prepared to compromise – and importantly what are dealbreakers for you)

Developing relationships with sector-specific corporate finance advisors and business agents can also be beneficial, as they often have early sight of potential targets and can assist with preliminary negotiations.

2. Understand and structure your acquisition finance

Cash reserves are often the most straightforward way to fund an acquisition, but using internal funds can strain working capital and hinder growth and operations in other areas of your business. There are alternative methods to consider:

a) Acquisition finance

You may already have a relationship with a commercial lender who understands your business. Alternatively, government-backed development banks (such as the Development Bank of Wales or the British Business Bank) often have designated acquisition finance funds.

Bear in mind that lenders will become embedded in the transaction timetable and legal process. Their due diligence and legal reviews can influence completion timescales significantly.

b) Alternative payment structures

Where cashflow is limited or retention of seller engagement is desired, flexible consideration mechanisms can help:

• Deferred consideration: Payment is staggered over time, sometimes tied to performance targets over 2–5 years (an “earn-out”)
• Equity: The buyer may offer shares in their own company as consideration, aligning future growth incentives
• Retention arrangements: A portion of the purchase price is withheld to cover identified risks or liabilities post-completion

These methods can ease cash strain while retaining the seller’s involvement post-acquisition.

3. Utilise professional support

Early engagement with accountants, tax advisers, and legal experts can significantly improve deal efficiency and structure. For instance:

• Tax advisers can help you structure the deal in the most efficient way
• Corporate finance advisers can assist in securing funding for the acquisition
• Corporate lawyers can assist throughout the process – we recommend getting input at the outset when drafting and agreeing heads of terms
• Lawyers can also guide on regulatory or property-related hurdles that could delay completion and should be flagged at the outset

It is important to consider your lawyers’ experience when it comes to such a significant transaction for your business. Experienced M&A solicitors will have more insight into the acquisition process and will be able to provide considered and in-depth advice to ensure the deal is completed with the best outcome for your business.

4. Carry out thorough due diligence

Due diligence is one of the most critical stages of acquiring a business. A comprehensive review of your target business’ legal, financial, commercial, and tax affairs helps mitigate the risk of inheriting liabilities.

Key focus areas of due diligence include:

• Contractual obligations with suppliers and customers
• Employment law and HR policies
• Intellectual property and IT assets
• Regulatory compliance
• Litigation and insurance arrangements
• Statutory registers and corporate governance records

Identifying risks early on can inform your negotiations, such as seeking price reductions, retentions, or indemnities.

5. Manage people and culture risks

Retaining talent and ensuring business continuity post-completion is essential. In many acquisitions, the knowledge and skill of senior staff or founders is central to the value and continued success of the business.

Things to consider include:

• Earn-out arrangements to keep sellers invested
• Bonus or share option schemes for key employees
• Employment contracts and consultancy agreements to lock in senior management post-acquisition
• Careful internal communication to avoid unsettling staff prematurely

Understanding staff motivations and cultural dynamics is just as important as financial and legal due diligence.

Conclusion

Acquisitive growth offers exciting opportunities but is rarely straightforward. Legal risks, financial exposure, and human factors can all impact the success of a transaction. A considered strategy, backed by appropriate funding, professional input, and thorough due diligence can significantly improve your chances of making a successful acquisition.

If you’re considering acquiring a business or structuring your acquisition finance and would like advice on any of the components mentioned above, get in touch with one of our M&A experts for tailored advice, using the contact form or on 02920 829 100.