Death by Acquisition
Not knowing where the rocks are drowns many acquisition teams.
Executing any step poorly increases the risk of failure.
1. Knowing what to look for and how to investigate target candidates is a process that needs to be made measurable.
A robust assumption challanging corporate exercise to determine the most important and least important attributes is critical piece of any acquisition. This process should include definable/measurable risk management questions, and core corporate strategies.
2. A system for affordable mass contact and information gathering and data management insures a more useful information system and a higher number of qualified candidates with a higher measure of success. Not knowing how to do this dooms us to the stone age practice of calling brokers and combing the yellow pages.
A recent client had investigated over one hundred poorly identified companies over four years with one small success. Another company investigated fewer candidates, but they spent years pursuing companies located all over the world, with attendant costs, and no success. Executive pay, travel, due diligence have been in the millions of dollars.
Fortunately neither company succumbed to the pressure of making a bad purchase (a very common problem), for that would have cost them many times more.
3. Being smart in valuation in these difficult times demands having a finger on the pulse and the ability to make and defend the right offer. This is no easy task without being tied in to professional organisation that monitors this information. We are prone to hip shoot this process.
Included in valuation is the snapshot integration financial and nonfinancial assumptions that must be predicted based on limited information that will be useful only if the process for information gathering is disciplined. Without an accurate view of the combined entities, all valuations are at risk.
My experience points to extreme optimism about upside valuation and integration.
4. Negotiation/deal structure/finance is of course the core of a deal. Personalities, deal structure, math, and assumptions are either all right, or they are all wrong. Any doubt in this area and now is the time to stop. If the first three steps were executed wisely and well, this step is much easier.
5. Acquisition integration chaos is more accurate terminology in many companies. From CRM, HR, to the operations, integration professonals can save relationships, efficiencies, and businesses. So often corporate branding, technology, and culture are shocked and damaged through an unprofessional, or inadequate approach brought in with the acquiring firm. Valuations are negatively affected and it takes years to right the wrongs that occurred in a poorly executed integration.
Only rarely have I seen mid market companies execute this step with any finesse or professionalism. http://www.tx2systems.com/ can be helpful.
There are many distinct pieces to acquisition. Companies that understand the process do well consistently. Companies that fail to grasp the comlexities and learn the disciplines, seldom attempt a second acquisition.
Have something to add?
Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.