When business is good, an acquisition lures the prospect of moving your company to the next level. But even veteran dealmakers sometimes overlook critical elements that can derail the best intentions. The following are five elements that should always be considered in an acquisition:
- Preparation – Whether the target company is a competitor or a complement, take a step back and ask if it truly fits the strategic direction of your business. Too many deals are made on emotion. Before talking numbers, develop a business plan that details how the new company will merge with yours. Be sure to list the pros and cons. Most importantly, make sure the executive team and your board of directors have a clear strategic acquisition plan in place on an annual basis.
- Communications – Seek outside perspectives and lean on advisors for constructive feedback. Good ones can be objective without internal blinders. This can include consultants, attorneys, accountants, IT, operations, sales managers, suppliers and strategic partners. Ensure that your executive team is fully engaged.
- Finance planning – Before determining the best way to finance the deal, develop a post-integration forecast and PandL. Cash and equity are not always the preferred method of payments. Debt from a multitude of sources can carry significant tax and cash-flow benefits. Leverage financial, legal and tax advisors for alternative strategies.
- Finding synergy – Before the deal closes, develop a six-month integration plan that uncovers as many efficiencies as possible. Too often, newly acquired companies trudge on in a perpetual silo without revealing the many opportunities they present. This includes shared resources, supply chain, operational efficiencies and workforce integration.
- Create an audit – A year after the deal, take a critical look at the entire process. This provides a second chance to uncover additional efficiencies that were not initially apparent. It also identifies critical lessons and the ability to improve the process during your next deal. Done well, there will be a next deal.
Ted Motheral is a partner with Walter ǀ Haverfield’s Corporate Transactions group. He be reached at firstname.lastname@example.org or at 216.928.2967.