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Is my company ready for an acquisition? Five quick checks to be sure

Is my company ready for an acquisition? Five quick checks to be sure.

With business transitions on the rise, growth companies see this as a perfect time to jumpstart sales and earnings with an acquisition.  Here are five quick checks on whether your company is ready for an important, game changing acquisition.  Business owners should ask themselves these five important questions.

 1.      Do I know what I really want/need from an acquisition?   Acquisitions come with risks as well as rewards so it’s important to identify some strategic benefits beyond just additional revenue.  Some of the other potentially big benefits can include new products, broader manufacturing or service capabilities, geographic expansion, improved business systems, additional leadership, or even a future owner. This list should serve as the basis for the targeting criteria.

2.      What can I afford?  Most companies utilize a combination of cash, bank debt and possibly some seller financing to pay for an acquisition.  Before starting a project, it’s a good idea to talk to your banker and accountant to understand your debt capacity and model the minimum and maximum size transaction that makes the most sense.

3.      Do I have the right team?  To greatly improve the chance of success, the business owner should assemble a team of people with critical expertise and experience.  Most acquisition teams include people experienced in prospect identification, business valuation, transaction structure development, negotiation, financial modeling, HR, computer systems, banking and transaction law.  Honest assessment is needed to decide whether internal or external resources are best for the team. 

4.      Who will lead the project?  Acquisitions require a lot of time and attention.  Be sure one person with the time, energy and expertise has been identified to lead the team.  Beware of adding responsibility for an acquisition to someone (including the President) who already has a 50 or 60 hour a week job. Some shifting may be needed.

5.      How will I measure progress and success?  Closing on a transaction is only one of the measures of a successful acquisition.  Plans and assignments need to be in place before closing to insure the timely achievement of cost synergies, sales and earnings targets, computer system conversions, new product introductions and other goals.  Remember, what gets measured gets done.

With answers to these quick questions, the company and project team should be ready to move ahead.  Please let us know if we can lend a hand.

Greg Loeschke