Growing Through Acquisition

August 29, 2014 2:12 am Published by

Acquiring another business can be a brilliant way to expand your own – and, on the other side, selling your business can be a key way to get where you want to be in life!

Whether you’ve seriously considered acquisition, or are merely ruminating on it now, here are a few tips as you begin the process.

The first thing you want to consider is not whether acquiring another business is a good idea, but whether it is a good idea for you.  Think about why you’re considering this.  Is it because it’s long past time to retire, but you want to get out with a pot of gold for your future?  Did someone else in your industry do it successfully and you figured it was a brilliant idea?  It may very well be the best thing you’ve ever done, but as with all major business transactions, don’t jump in blind.

Here are a few common mistakes made that result in an unsuccessful business acquisition deal:

Lack of connection with new owner/management – to use a word that’s a bit of a fad, “synergy” of all the parts is critical here.  You will be working quite closely with the business owners who are selling you to.  Think back to when you started (or purchased) your own business – how important it was to have a real connection with your business partners.  You wouldn’t dream of going into business with someone who wasn’t on the same page (and often, many businesses fall apart because the founders have gone different paths).  The same applies with acquisition.  Step with care.

Underestimating the length of time required – by and large business acquisition is not a matter of throwing out a number, agreeing to it, shaking hands, and making lots of money.  Research, due diligence, projections, and checks are all made.  Be aware that you’re getting into a long process, even if everything goes smoothly.  And be aware also that whilst this is happening, you’re still managing your current business as it is!

Paying too much for the business – It’s easy in the initial excitement to see all opportunity, no threat.  Make sure you’ve done your research, too, on the business you’re about to buy.  Get some independent valuations done, including a full SWOT analysis, cash flow projections, and budgets.  Evaluate the customer base – are they quality customers, or just what the company could get at the time?  How are the loyalty levels?   Get a thorough understanding of what you’re buying, because “Let the buyer beware” is extremely applicable here.  Once the deal is done, you’re the one who will be carrying things forward with what you’ve got.

A focus on personal financial gain – Many business owners are simply considering whether they’re ‘getting a good deal’ (on both sides of the acquisition process).  It’s always difficult to think objectively, but it has to happen here.  Have you genuinely weighed up the risks that you’re taking on in this deal?  Or is everything rosy and happy?

The right deal, the wrong time – Sometimes it’s an absolutely perfect business to buy, or opportunity, but you’re just not ready.  Your team isn’t ready, your product or service has problems, your infrastructure needs development.  Always be willing to walk away if the timing isn’t right.  You’ll thank yourself later.

No matter how far along you are on the path to acquisition – whether you’re just beginning to consider it, or you’re in the midst of the process – make sure you get your research done.

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This post was written by M3evolve