Acquisition Cost Benefit Analysis Saves More Than Money

elephantKnowledge is Power.  How many years and how much money should a board allow management to invest before questioning the strategy of their corporate acquisition team?    Can your board define success or failure?

Contact me for our free short (8 minutes + your questions) webinar,

Mike@Packardgroup.com

Continue reading “Acquisition Cost Benefit Analysis Saves More Than Money”

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Favorite Lawyer Quotes

Pacquisitions's Blog

iceberg pic“My client was so sure he was right! Every time I showed him a red flag – he charged at it like a bull at a bullfight. The results were predictable.”

“Some mistakes can be papered over. Some cannot. The cost of the difference is astounding.”

“Bad acquisitions can cost you your company. If you’re lucky in a bad acquisition – it’ll only cost you your profits for a decade.”

“People don’t have to listen to me. They should. That’s what they pay me for.”

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Better. Not Broker.

Broker560

 This is a sad story about the decline of a small town manufacturer. When the economy went into recession, the company contracted from $6MM to $4MM and became unprofitable.

The owner hired a broker to sell the plant. A year passed without any offers from any qualified buyers. Another broker was hired. Of course, by now, the ‘for sale’ issue was universally known throughout the town and morale plunged. Know what else plunged? Business. Being ‘for sale’ is not a great position to have when trying to land new clients. Their revenue contracted further to $3.5MM. They became more unprofitable.

That year also passed with no offers from qualified buyers.

So the owner hired a third broker. And lo and behold….

Continue reading “Better. Not Broker.”

The hidden cost of acquisition

Binoculars560

Tom was a proud father. After ten years in lesser positions at his business, his two children (Sara and Jim) were to begin higher level participation. Tom did have a lot to be proud about – his mom and pop shop had grown into a multi-million dollar enterprise that was a significant employer in an out-state town and his children had completed college and had chosen to be part of the family business. Continue reading “The hidden cost of acquisition”

What would you do if you owned this company…

MaturingIndustryChartPaul was in a quandary. He had built up a nice company and captured a decent portion of a rising segment. But looking into the future, he saw trouble ahead. As his segment matured, he forecasted that the segment would commoditize, revenues would drop, and margins shrink.

Like most business owners, dropping revenue and shrinking margins takes the fun out of the game. However, a service segment had emerged. It was in a fledgling stage but showed incredible growth potential.

 

At first glance, Paul thought his options were:

1) Get out now
2) Ride the wave and get out in a couple of years
3) Build a service division

 

What would you do? What did Paul do?  Continue reading “What would you do if you owned this company…”

Better Answers – Accepting Reality

roughwaterWhether it’s business or family investments, putting a stop to unending losses is a smart move.  When I first married, my new family asked me for business advice during a family summer vacation.  Up to that point we were such good friends.

They had invested in real estate in a high market and were stuck with low rents and a significant cash loss every month and even more losses if they sold in the down market.

I had three glasses of wine that evening and told them what I would do.  Ouch.  No one liked the math and thought even less of me for pointing it out.

The good news is that they are a kind people, and after some months of agonizing and repeating my simple math exercises they began to see the wisdom of paying now to end the forever bleeding of their lower than mortgage payment rents every month.

The sooner we accept that a mistake has been made, the sooner losses can stop and our egos and checkbooks be mended.  I’ve worked with companies protecting inventors / founders egos, with what amounts to delusional thinking about shifting markets, illusive profits, and outright craziness to continue a financial bloodletting until some poor dumb sap has a third glass of wine and spills the beans.

Do you have another point of view or story to share?

Playing At Acquisition

alligatorBroker driven and opportunistic deals are appealing and the excitement of the chase builds quickly.  Some of the team members have done a few acquisitions, we are smart, successful, and experts in our field, why wouldn’t we be winners at the game of acquisition?

I like making brick paths and walls and feel a great sense of accomplishment when I have completed some small structure with bricks in a home project.

But when I watch a real brick layer complete a commercial project, with what looks like a thousand precisely placed bricks in one afternoon, I am aware of the skill and practice being demonstrated. I do not compete. I’m pretty sure acquisitions involve more complexities and pitfalls than bricklaying.

50% of acquisitions don’t make it to the closing table, and according to Wharton, Harvard, and Deloitte, 60% of acquisitions destroy value. and over 80% don’t add a sustainable competitive edge.

Then there are the giant losses incurred by completing seriously flawed transactions.  A recent client was still paying for a bad acquisition ten years later (losses exceeded the purchase price).

It’s allot more fun to complete a deal that took a little longer and see it add value than it is to spend years undoing or making up for an imperfect transaction.

Knowledge is power – experience our short free webinar.  mike@packardgroup.com

The Grinch Thank Stole Business

iceberg picAfter years of growing a profitable business in the northern suburbs, Marvin woke up one morning and knew that it was time to get out. Now, it just might’ve had something to do with a very cold temperature and continued frozen forecast. But for whatever reason, Marvin’s brain flipped a switch and retiring and moving south were all he thought about.

Well, as luck would have it, a fellow Rotary member named Alan, expressed an interest. They sketched out an agreement then had Al’s lawyer put it in legalese. Inside of thirty days, Marvin had put his house on the market and moved to Florida.

It was everything Marvin had dreamed about: moderate temperatures, relaxed schedule, and the beginnings of a social life.

Three months into retirement all was going well. His Minnesota house had sold. Alan’s business purchase payments were coming in steadily.

Six months into retirement he couldn’t believe he hadn’t done this sooner. But Alan’s payments were starting to be late…

Continue reading “The Grinch Thank Stole Business”

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