Acquiring Advice: Seven Things Business Owners Should Remember
Forbes Business Development Council
Remembering all the do’s and don’ts when your company is considering an acquisition can be particularly tricky. You and your team need to know the history behind decisions, and what those decisions may mean for the long term. You also need to decide whether a company’s culture will marry well with yours — and if there are conflicts in core philosophies, what the best course to take is.
Most of all, you need to go into the process with a clear set of eyes, making sure you focus on the end result, rather than the joy of making the deal.
To help, seven members of Forbes Business Development Council, below, provide their best advice to help ensure business owners are performing their due diligence when it comes to an acquisition. Here’s what members had to say:
Members discuss a few things you should keep in mind when weighing a business acquisition.Photos courtesy of individual members.
1. Ask Why
During the diligence phase of an acquisition, you will hear a lot of explanation around process and strategy. When it comes to the portion you may own, I recommend always asking why things are the way that they are. Ask questions to determine how the business got to its current state. This will give a deeper understanding and historical context of the structures and choices made. In regards to diligence prior to the acquisition, surface level knowledge simply won’t cut it. – Christopher Kingman, TransUnion
2. Have Your Experts Review Everything
In order to truly do your due diligence, pull together a team of experts to review every aspect of the company that you are considering acquiring. This should consist of specialists across human resources, sales, finance, operations, marketing, tax and accounting. You may even consider hiring a valuation expert to pull together a thorough assessment of the company’s history and future prospects. – Rakhi Voria, Microsoft
3. Keep Love Out Of It
Don’t fall in love with any acquisition; don’t let the thrill blind you. Remember that an acquisition has to make business sense, and similarly to buying a car, you have to look under the hood. Fall in love with the return on investment you will make versus the sexiness of doing a deal. If you do that, you will have made the right decision. – Wayne Elsey, Elsey Enterprises
4. Check For Culture Compatibility
Before you dive deep into the company P&L, look closely at the culture of the company. Talk to the front lines, examine major decisions made over the last year, and be sure that the acquisition is a reasonable fit with your company vision, mission and values. Treat the acquisition like the most important hire you can make. If the organizations don’t fit culturally, you are better off walking away. – Brandon Ficara, Toco Warranty
5. Hire A Professional
Whatever it is you’re buying — an established company, a startup, a piece of real estate or a dishwasher — someone has already done it before you. Identify an individual or a company that is professional in that field, and pay them the big bucks. Their fee will probably be a drop in the bucket. – Ilan Tzadka, Lighthouse Real Estate Investments
6. Drop It If It Doesn’t Make Sense
The vast majority of acquisitions fail. Yet most of them were started with great optimism. Ask yourself honestly why this one really has a better chance. Drop the potential upside by one half, and double the downside. Drop the deal right here if it doesn’t make sense any more. – Vijay Sundaram, Zoho Corporation
7. Provide Consistent, Clear And Transparent Information
Over my 20-year career, I was a part of two acquisitions where my company was acquired. My first experience wasn’t as positive, given lack of clarity and inconsistent messaging. When Kforce purchased Hall Kinion in 2004, they did an amazing job by providing consistent, clear and transparent information. By getting ahead of communication, it improved morale and inspired employees! – Casey Jacox, Kforce
Forbes Business Development Council is an invitation-only, fee-based organization for senior-level sales and business development executives. Find out if you qualify at forbesbizdevcouncil.com/qualify.