Reducing Risk in Acquisition; Building The Best Team

It takes no special talent to find companies to look at, make offers, arrange finance, & close deals. Any good broker can fill your plate with attractive companies to review.

This explains why most deals don’t add value.

Deals that add value are those that were well defined and researched on the front end by smart people using high value process and followed up with good negotiating, due diligence, and integration teams.

A failure in any of these areas has the potential of making a giant mistake. Half of all non-financial business failures were private equity owned last year.

Even the people that should know how to make acquisitions are making big mistakes.

Even the best team can still make mistakes, but far fewer and much smaller.

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Wow For RainSource Conference

I attended the high energy RainSource Conference in Bloomington last week and was really impressed with the organization and connectivity at the conference. It was alive with smart people and great ideas. The speakers were great (I was really wowed by the X Prize speaker) and it was stunning to see so much entrepreneurial talent & achievement in one place.

Rain Source Capital is creating 121 Angel Funds around the country to provide money for early stage companies. The conference brought together investors and early stage companies with the intention of educating and making connections (it worked).

Cudos to the RainSource team for a powerful conference and for working so hard to help business growth, the economy, and jobs.

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Choices (it’s all about risk)

This company had struggled for years to reach profitability when I received the call to talk to the founder about his choices in the marketplace.

Why not consider a back up plan in case the funding source you are counting on does not materialize? After all, being a partner in your project is better than failure, which often has personal repercussions beyond the business losses.

The CEO was certain that the next round of funding was just around the corner and he wanted nothing to do with the alternative I had suggested.

My suggestion? A Strategic partner would help gain market share and / or build a more efficient manufacturing capability and allow him to concentrate on what he did best (and quit spending most of his time raising money). I followed up diligently to no avail.

The banker that had referred him to me a year ago, called last week to tell me the firm was being liquidated.

Another great technology, great product, and good business model imploding because the founder would not take the finance blinders off to look at other approaches to survival.

It hurts me to see the lost money, energy, jobs, technology, and all the years of creativity and building that went into this firm.

Perhaps my approach is too soft.

I tell people that if they “just wait to say no” and look at alternatives in case their own plan doesn’t work. Then there will be a choice available as a resort to failure.

This does not work in most cases. I get more liquidation calls than I care to take.

Your stories and suggestions for improving my approach would be appreciated.

MikeT