Trouble Understanding the Acquisition Process?

[Ellie Perlman]

Since we're seeing deal flow pick up at my company, I thought it might be helpful to breakdown the acquisition process for anyone that is just beginning to build their portfolio. 

Every syndicator has a different process in which they manage their acquisitions. The main thing to remember is that building a defined process and sticking to it will help you run an efficient company and help you win more deals and scale quickly. In this document I will lay out the acquisitions process that I’ve been using in my company. You can make amendments to your process the way you see fit. However, it’s important to understand how the acquisitions process work from the brokers point of view.

Brokers upload deal information to their websites and send emails to their buyer list. On the websites/emails, the may or may not include the price and the deadline to submit offers. If they don’t – you’ll need to reach out to them and inquire about them.

After the information is out, there is a set date for all potential buyers to submit a letter of intent ("LOI" in short). Usually, it takes 3-4 weeks between initial information release to the LOI dead line. In most cases, brokers hold property tours with potential buyers starting the day they release the information and until the last day to submit the Best and Final offers (more about that stage below).

After all offers are submitted, the broker reviews them and sends a summary to the seller, along with their recommendations on who to proceed with.

The next step is a Best and Final round. The seller chooses the groups they wish to continue with, and the broker reaches out to those groups and invites them for the Best and Final round. Usually the highest bidders make it to the best and final, but it’s not always the case. Buyers have 5-7 days to sharpen their pencils and submit an amended offer.

After the selected buyers who have made it to the Best and Final round submit their final offer, the broker invites a few of the buyers to a Seller Call, based on the seller’s selection. The seller holds calls with 3-5 groups and interviews them.

After the seller speaks with all buyers, they choose the winning buyer and the official negotiation starts.

During that period, the buyer and seller sign a Purchase Sale Agreement (“PSA”), and begin the Due Diligence period, where the seller discloses information on the property based on the buyer’s request. If there is any deposit, it is paid most often when the PSA is signed, or a few days after. During that time, the buyer signs a loan agreement with their lender.

After the Due Diligence period is over, and assuming everything went well, the buyer completes the purchase and the money is sent to the seller. If, however, the buyer found things they were not aware of, and are significant enough, they might try to renegotiate the price or the terms, or both.

I added a resource to my company (Blue Lake Capital) profile page that has more information on how to build out an internal process for this if you'd like more information. 

Happy Huntings!