Introducing new products. Breaking into a different geographic market. Expanding the workforce. Whatever your strategic business goals, owners and executives need to develop the right suite of tools and tactics to achieve them. In light of factors like generational ownership shifts and industry consolidation, acquisitions can be an efficient and effective way for a business to expand, diversify or consolidate in areas like market, products, supply chain and workforce.
Using acquisitions as one component of an established growth strategy is a more prudent approach than carrying out acquisitions solely for growth’s sake. That’s why it is essential for owners and executives to fully consider whether strategic acquisitions make sense for their plans and current resource capacity (human, financial and operational). Below, you’ll find some pros and cons to help facilitate the decision-making process and due diligence best practices for those who choose to proceed.
Do Your Homework
If you’ve weighed the pros and cons and are ready to use acquisitions to advance your strategy, it’s time to get prepared. If necessary, start by getting your own house in order. Make sure operations are solid, finances are strong and your team is unified. The stronger your business is, the better it can absorb another company that is not as pristine. After all, there is no need to deal with issues at your own business, when you may have to address issues with a target company.
During the due diligence phase, the traditional focus is financial verification and operational integration. But don’t overlook culture and communication. As mentioned above, incompatible company cultures are the scourge of many post-deal integrations. Much of this consternation can be avoided if business owners have a well-defined culture and make sure to look for target companies that shares those values. Two-way, honest communication between interested buyer and target is essential to gleaning reliable information during the due diligence phase.
Acquisitions can be a powerful tool to achieve business goals, but they must be conducted strategically to manage the inherent risk and significant drain on buyer resources. Tapping into a trusted advisor experienced at managing the full spectrum of acquisitions from target evaluation through post-deal integration, like the team at RKL, can help you make a sound decision that will enhance, not diminish, your company’s future potential.
Contact us today to start the conversation.