Thinking about acquiring a rival business, or one that cold complement your own?
Here are the basic rules of engagement:
Making an acquisition is a good way of getting a head start in a new market that you believe would be tough to make headway with in your current guise for any reason. Or if you are looking to add product or service lines.
For example, if your business is operating purely in the private sector and you want to move into the public sector, the right acquisition will enable you to leapfrog in, bypassing the necessary qualifying periods and gaining instant credibility.
If you want to accelerate the growth of your business, perhaps so that you in turn can sell it, then you can achieve this is in a fraction of the time that organic growth would take.
It is worth noting that any company that is looking to acquire you will be less interested in the money you have borrowed to make your acquisitions and will be focused on your revenue streams and underlying income that will both repay the loan and generate more profits for the acquirer in the years ahead
What should I be looking for?
There are three areas you should consider carefully: strategic; financial and operational.
Firstly from a strategic point of view you are looking for synergies and whether, if successful, the acquisition will get you where you want to be in terms of markets, market share and skill sets. Secondly from a financial perspective you are looking for what you believe the potential to be versus how much it will cost.
Thirdly there are operational considerations around issue such as locations, the skill and age of the management teams coming in and will the culture of this new business fit with what I already have?
In simple terms you need to assess what could be achieved by bolting what I am buying together with my existing skills and contacts and then ask if it is bigger than the sum of its parts? Do the opportunities outweigh the risks?
How important is a good cultural fit?
A good cultural fit is very important so look at the way the company operates. You need to recognise that its culture and style likely underpins its success and respect that. However if they operate in a polar opposite way to your existing business then it probably won’t work.
For example if you require your teams to work shifts and be mainly office based and your target acquisition works Monday to Friday from home – it might be time to walk away!
How can I make the process simpler?
Probably the simplest way is to engage with a merger and acquisitions specialist that operates in the sector. On the upside they will be introducing you to businesses that are ready to sell and have a realistic view of what their business is worth.
By Jeremy Waud, Chairman of Incentive FM Group