About three years ago a CFO talked to me about his company’s acquisition search process. He confided in me that his firm’s president had traveled a great deal to research potential targets with very poor results.
Based on the CFO’s recommendation, the President met with me to discuss our process and tools.
He quickly told me that I could not possibly add to what he knew about his industry or his database for potential candidates and he showed no appreciation for our criteria measurement tools, or the concept of large scale contact and database building & management that our company provides to clients just like his.
He preferred his one-at-a-time trips to visit target companies and sent me on my way.
Two years after our meeting, I checked in again with my CFO contact and asked the direct question, “has your company completed a transaction since we started this discussion (elapsed total time of five years)”? His answer was “no”.
What this company has spent investigating acquisition candidates, one at a time, nationally and internationally over the past five years is many times what they could have ever spent with a professional for profiling and researching target candidates, compiled in an organized fashion to ensure a selection of well chosen candidates.
This is another case of a board hiring an outside president because they recognized the need to grow their company by acquisition.
Companies like this sometimes feel compelled to make transactions that don’t fit.
That’s where data feeding the KPMG study stating that only 17% of acquisitions created a substantial return add value comes from.
Know the acquisition history of the president you hire if you need to have acquisitions done. If you are working with someone with a small history, it is necessary make up for what’s missing. Acquisitions are a complex, costly, and risky process.
Have something to add? Your own business wit?
Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.