For many businesses, the absolute fastest path to growth is to branch out and acquire another company. The process that takes place during an acquisition, whether it’s the company’s first or their tenth, is extremely influential in the long term, overall success of the agreement.
While an acquisition might cost more upfront than other growth strategies, the payoff is worth the risk – as long as you’re thoughtful during the acquisition process. Many businesses that are approaching the acquisition process for the first time understandably have questions. The process to acquire a company is complex, however, we can start by talking about the four most important things to know before you begin.
The Connection Between Acquisition and Brand Image
It’s easy to look at a potential acquisition and see dollar signs, but it’s more important to step back and assess how well the company you’re looking at is aligned with your brand image and core values. This is important for several reasons.
First, there is always an adjustment period with a new acquisition – always. This period can be extremely difficult to navigate if you’re devoting all your resources to aligning your core values and processes. Choosing a company that’s already aligned with your basic mission, values and operations will provide for an easier transition.
Secondly, merging or acquiring a business that’s a complete disconnect from your core brand gives the image that you’re off playing in left field with no real idea of what your business focus really is.
Due diligence is a necessary part of the M&A process. While you’ll likely have help with the legal aspects of due diligence, you need to start doing your homework before you even consider contacting the appropriate players about an acquisition.
You should start by researching every bit of information about the company that’s available publicly, including seemingly benign elements such as blog posts and social media action. These are all pieces of the puzzle that will help you assess the brand’s validity.
Secondly, once you connect with them it’s important that you leave no stone unturned in researching their financial information, quality of their staff and their corporate culture.
Know the Costs
The main number that gets looked at when considering an acquisition is the negotiated upon price. However, it’s important to look well past that number and determine how the operating costs of the newly acquired company will impact your overall cash-flow.
For example, you need to have a solid understanding of their monthly operating expenses, payroll, overhead, and the anticipated costs associated with any training that may be required with the acquisition.
Assemble Your Team
One of the most important assets you have in the acquisition process is the team that will make your dream of growth a successful reality. You need professionals who are skilled in all aspects of the M&A process – including due diligence, business valuation, deal negotiation and much more. Make sure you have this team in place before you begin the process.
If you’d like to know more about how to acquire a company and set your own business on a successful growth trajectory, we’d like to speak with you. Contact Steiner Business Solutions today to learn more.