Acquisition Success: The Top Three Things to Focus on When You’re Buying Another Company
Posted on: September 6th, 2017
An acquisition, to many, sounds like the uncovering of a goldmine. Abundance doesn’t just appear after a merger or acquisition, though. In fact, an article by Harvard Business Review stated that while companies spend over $2 trillion each year on acquisitions, the success rate runs between a low of 10% and 30%.
Pouring money into these prospects can either go really well, or cost you a pretty penny. However, the particular acquisition that you’re interested in is appealing and the potential payout looks attractive, right?If you think you could fall in that 10-30% success rate, take the leap.
This is what you need to focus on in order to not get lost amongst the statistics seemingly counting against you.
Due Diligence
Assume a comprehensive due diligence which focuses on operational, financial, and management plans. Thoroughly assess how this specific acquisition serves the betterment of your business.
What is the purpose of the deal and does this business fulfill the motivation for your plan? Additional factors for you to investigate include corporate structure, taxes, intellectual property, material assets, contracts, litigation, and other compliance and regulatory issues.
The Chemistry
In accordance to due diligence comes the chemistry of the deal. The strategic sets a direction for the organization.
Stemming from that, is the operational plan, which will determine matters such as the personnel that will undertake leadership roles, the tasks that must be implemented, timelines that must be met, and the amount of financial resources required for each task to be completed.
Think of it like forcing you children to share a bedroom after years of having their own rooms. After the transition, it’s vital that the relationship is maintained and the momentum continues so that each business can thrive.
Noting the inner weaving of the culture and finding a way to integrate these new policies and procedures can supply a seamless transition. Overlooking these details, however, can mean a failure post-merger, so, pay close attention to the dynamic.
Capital and Growth
Last but not least, prioritize your capital and growth plans. Make sure you have enough money on hand to execute the integration and to provide room for additional growth.
Acquisition financing will not only be necessary to get to closing, but its process will give you a stronger grasp on important details regarding the business you are about to buy.
As an acquisition lender goes through its learning process, they collect a lot of valuable information for you to learn from that you can use to develop a more effective game plan and improve the business after the deal is complete.
Some of the most vital matters will be determining how to integrate costs, and calculating the right amount of capital to close and to build combined companies.
Attract Capital is an acclaimed financial advisory firm that provides Mergers and Acquisitions consulting services. View our “Merger and Acquisition Checklist” or contact us to have a checklist created to facilitate your success.