Defining Acquisition Risk, by Mike Tikkanen

According to Interim CEO, 71% of their placed executives have completed less than three acquisitions when they are hired for that purpose. This partially explains why between 53% & 61% of transactions destroy value & only 17% create substantial returns From Planning to execution to integration, acquisitions are complex.

The finely tuned watch comparison is an appropriate analogy. Any misaligned piece causes the watch to run badly, and while there are many people capable of dismantling the watch, few can put it together.

Repeatedly, I see teams of smart people with pieces of the skill set required to understake the acquisition process, only to observe disastrous consequences of an obvious mistake blowing a hole in the transaction (or worse yet, forcing a poorly chosen transaction to be completed).

Much of the candidate criteria determination, auditing, and integration is non linear. It’s surprising to see how much attention is paid to numbers, and how little to people, systems, relationships, and networks.

Mapping an acquisition is too much for this blog, but to state the wisdom of including a plan for non financial audit and integration at the time of profiling and research would guarantee an understanding of process and a good chance that missing gaping misfits in people and systems would less likely ruin your deal.

Risk Considerations:

*Without definable & measurable criteria, acquisition candidates are often weighed emotionally and not good business,

*Old data is almost meaningless, old data that is poorly presented or hard to work with is worse than meaningless (operating without sufficient information is very high risk),

*Too much information residing within a few retained employees (going forward in the new deal) often destroys valuable companies (contract or not),

*Looking at one prospect at a time, assures you of being at the mercy of one prospect at a a time,

*Not prearranging finance insures wasted time and resources,

*Success requires a meaningful strategy & a team with the right talents for each step of the process.

Happy new year.

Mike Tikkanen

Mike has been a business consultant and owner of Packard Acquisitions since 1988. He works with companies seeking to grow by helping them through the complicated process of acquisition search, profiling, and transaction.

2 thoughts on “Defining Acquisition Risk, by Mike Tikkanen

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  1. After many years in both big corporations and start ups, I have been on both sides of the acquisition actvities. I have seen clever small company management sell essentially worthless technology with smoke and mirrors. They sell market opportunity (unmet clinical needs) and the speed at which the market can be reached. What is lacking on the acquisition team? Simply scientists and engineeers. People who understand data. The team must insist on technical data to back up the smoke and mirrors.

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