Rules To Follow When Planning Acquisition
Acquisitions have previously been considered a sign a weakness. In fact studies have shown that a majority of acquisitions are failures. So why do we still do it? A few reasons we might want to acquire is, instant expansion and organic growth. While these processes may be slow, if done correctly you can easily see success.
Some believe it all depends on the “right person”. Someone Shrewd, cunning, and highly intelligent. The truth is, an acquisition is a business process and should be dealt with as a business process, it shouldn’t rely on one person, and one power of mind.
Keep in mind mistakes are inevitable when it comes to acquisition. There are so many pieces and moving parts you WILL make mistakes. Your process doesn’t have to be 100% right, but it does have to be at least 51% right. As long as you’re showing any positive, no matter the scale, consider it a success. Growth will come later.
During the early phases of an acquisition, your due diligence checklist is crucial. This is something you will learn over time. How many questions to ask, what questions to ask, and how much information can you get? This will all tell you how to proceed with an acquisition.
These 5 guidelines will help put you in the best position for a successful acquisition.
- Stay in Close Proximity
It’s better to not do something completely different than what you’re already doing. Choose something familiar to you, something you know the dynamics of, rather than trying to diversify too much.
- Smaller is Better
One of the biggest mistakes you can make in an acquisition is biting off more than you can chew. Your financials will be much more conservative, but it’s important that your employees and departments implementing the acquisition are able to handle the process and adapt to the expansion.
- Get Investors
Investors not only reduce your personal risk of financial exposure, but they also help assure your venture is well thought out with a fresh eye and new resources.
- Change Your Mindset
A new acquisition and expansion may seem glamorous, but in reality it’s real work, and a lot of it. Measuring the business adequately beforehand will help you determine what you’re getting into and what to expect. It may be the same or similar industry but don’t expect everything to run the same. It will be different, so you mustn’t enter it with the same mindset.
- Don’t Order When You’re hungry
This may seem like silly rule, but making a rash decision just because you want it could end up being the worst business decision you can make. Instead of deciding to move forward when you want it most, take time to thoroughly think about it. When you’re stable, then entertain the thought.
Moving forward with your acquisition, sticking to all the rules is crucial, missing a single rule could determine the success or failure of your acquisition. It goes without saying this is a cumbersome process and seeking an experienced advisor is highly recommended.