Before Entering Into An Acquisition: Consider This

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The uncertain economy explains some of the decline in corporate M&A activity over the past few years.  Major corporations are still hoarding cash. Large acquisitions now seem (appropriately) less focused on geographic expansion and more focused on increasing capabilities to improve the profitability of core products and services.

But I am have noticed increased interest in acquisitions in the mid-cap arena. When you drill down deeper, you sometimes discover that a President of a privately held midsized companies views “having at least one successful acquisition under his belt as an important credential.”  In the President’s mind he has proven that he understands how money works, can win a potentially complex negotiation, can eliminate a competitor, and is a serious contender ready for bigger and better things. Can you see the element of ego involved with the view of first acquisitions?

So when an opportunity surfaces, that President tends to jump at the chance and dives right into projecting how much money they will make when the acquisition works.

It has been my observation of the behavior of Presidents of many companies end up doing any of the following unproductive things:

  • become so distracted by acquisition negotiations that they drop the ball on major proposals.
  • suddenly pull back and not involve their Controller or CFO in analyzing the potential cost of acquiring a business.
  • “go dark” and become very private and not communicate what they are doing to their COOs, VP Sales, or other members of their executive team.

Think about the damage and loss of trust when that happens!

A President can become so determined to make his first acquisition work that he skips important due diligence steps.  This is often referred to as “falling in love with the deal.” I laughed when I heard that phrase used about CEOs of larger companies during a recent webinar, M&As VIEWED FROM THE BOARD AUDIT COMMITTEE PERSPECTIVE sponsored by the NACD and KPMG.

“Falling in love with the deal”

This is so true and is worth repeating, because it is exactly what happens.  But, if you are the President of a privately held midsized company, you can’t afford this mentality.  Consider the following to protect your interests:

  • taking a seminar or two about what’s involved with due diligence
  • involving your executive team in the discussion, since you will need assistance to succeed
  • establishing at least an advisory board with experience in things like acquisitions, so someone asks you objective relevant questions
  • the cost of distraction, lost trust, missed opportunity, etc. if you let yourself get all wound up in trying to prove you can negotiate an acquisition on your own
  • And also ask yourself why you feel the need to prove yourself or why you are looking for greater challenge…more action.

Changes in what you are doing on a day to day basis could free you up to take on new exciting challenges (including acquisitions) in a more appropriate and cooperative manner.

About Aldonna Ambler:
Known as The Growth Strategist®, Aldonna Ambler built and grew a suite of companies to help midsized B2B companies achieve accelerated growth with sustained profitability® A Certified Speaking Professional (CSP), Ambler has addressed over 2000 audiences and hosted a syndicated online talk show about growth strategies for 9 years. As a growth financing intermediary, Ambler raised over $1 Bil dollars for midsized companies. The winner of over 2 dozen prestigious national and statewide "entrepreneur of the year" awards, Ambler is available to speak about “profitable growth during any economy” and/or serve on the board of a growth-oriented privately-held company.

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