Acquiring A Business 7 Questions You Need To Ask
If you are looking to grow your business by acquiring another business there are 7 questions you need to ask.
In this article we consider the questions that cover
- Sums,
- Actions,
- Outcomes
- Fit
Acquiring A Business 7 Questions You Need To Ask
- Why do you want it – this seems like a simple question but answering it truthfully will allow you to make sure that you are not just looking for a vanity purchase and have completely identified the rationale for the purchase
- Have you done your sums – so many acquisitions start with the desire to increase the overall value of teh organisation. So if we are a £20 million company purchasing a £5 million pound company grows our business by 25% . If only it was that simple it is critical that detailed analysis is completed to see if the acquisition will actually help in your growth
- Will it make financial returns – this links closely to point 2 in terms of will you be able to do things as a result of the business that will mean you will grow more profitably and faster than if you just grew organically
- Can you live with any outcome – if your acquisition is successful are you prepared for the pain and heartache that may follow the purchase
- Do you have a plan – so 100 days after acquiring the business are you absolutely certain where / how you will have progressed. A detailed plan of how you plan to manage the acquisition is a necessity
- How will it be fitted in – will the acquisition be integrated into existing operations or will it remain a standalone independent operation. In most cases elements of integration are required to allow for cost savings etc
- How long will you have to wait for benefit. It could be that you are simply acquiring in order to gain a customer list at which point you will transfer customers into the core activities. If you are buying IPR it could be many years before you see a return on investment
Only 50% of acquisitions are successful
With only a 50% success rate on acquisitions there are 4 points to consider
- Follow the money
- Resolve any people or power issues “Fast”
- Ensure that the deal structure doesn’t impact on change
- Make sure that due diligence goes well beyond just the financial issues
Acquiring A Business 7 Questions You Need To Ask
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