It is more common to find acquisition teams weaving a silk purse out of a sow’s ear than to find them working on the front end to build a process and tools that create database of qualified target candidates to meet measurable criteria worked out through meaningful exercise.
Work done on the front end to systematize the acquisition process minimizes the chasing of dead ends & saves considerable time & money.
In response to the majority of deals that never make it to closing (50%) and those that destroy value once they are completed (over 50%) a few smart companies have incorporated the innovations that makes systematic growth through low risk acquisitions predictable (Warren Buffet, Digital River, Lawson Software – the “old” Lawson Software).
The manufacturer I left last week was sure there was no budget for programs and process that would appreciably lower the risk of bad candidates and failed transactions. They were however, full speed ahead spending millions of dollars on acquisitions.
A recent PA client just finished digging out from the financial disaster that was the result of a bad acquisition completed ten years ago.
Like the cat burned when it jumped up on a hot stove; it will never again sit on a hot stove (nor will it ever again sit on a cold stove).
If you have a story to share about a company you know that chose the innovative path over the common we would love to hear about it. If you know a story about an acquisition that failed or destroyed value, remember it’s not nice to point.
Is your company common or innovative?
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