About 70% of acquisitions fail. Either the deals don’t result in the expected synergies or worse – they detract from a company’s existing value. The good news is that you can beat these terrible odds by preparing before you begin pursuing deals. In our experience, here are ten questions we ask our clients before embarking on any acquisition program:
- Vision – Do you have a clear consensus of what you want your company to look like in 5 years? in 10 years? Can this vision readily be understood by everyone (not just the management team)?
- Alignment – Does everyone on the acquisition team agree on what type of company to acquire and in which markets?
- Market– Do you have a comprehensive understanding of the markets (size, growth, characteristics, trends, keys to success, customers, etc.) into which you are considering acquiring?
- Criteria – Have you developed a complete set of prospect criteria with measurable metrics to evaluate and prioritize all candidates?
- Prospect pipeline – Are you able to maintain a robust pipeline of attractive, qualified acquisition candidates?
- Preferred buyer – Have you identified compelling reasons why a prospective acquisition candidate should sell to your company instead of another bidder?
- External advisors – Have you lined up all the legal, accounting, and valuation resources required to advise on the transaction?
- Due diligence – Do you have a team established to perform due diligence?
- Integration – Can you conceptualize what the post-acquisition combined company will ideally look like, complete with owners’ new role and the integration of functional areas?
- Financing and deal structure – Do you have a basic understanding of your ideal deal structure and how you will finance the transaction?
If you can thoroughly answer these ten questions, you are ready to begin your journey to acquisition. If you’re not sure about many of the answers, you have some work to do before you’re ready to pursue a transaction. Make sure to spend the time upfront to the foundation for success so you can avoid being a part of the 70% failure rate.
