March 14, 2013

Keep it simple when considering an acquisition

M&A advisors can help business owners keep their goals simple and realistic when working toward an acquisition.

In the last week alone, Twitter, Salesforce and Oracle have made high-profile, strategic acquisitions of businesses that will supplement the future growth of these three companies. The fact that technology companies are acquired so often shouldn’t be an indicator that the process is easy, though. If an entrepreneur does not have a long-term plan in place, there is little chance an acquisition will succeed. 

According to a contribution piece in Harvard Business Review, it’s not uncommon for an acquisition to eventually become part of a company’s growth plan. Whether a serial entrepreneur decides it’s time to move on, or a long-time business owner wants an exit strategy, there are basic concepts to keep in mind through the acquisition process.

First, the article explained that owners must create a high-level picture of what they want their company ideally to look like one year after a successful integration. While this is especially important from a financial standpoint, operational practices, strategic initiatives, organizational structure and culture should also be considered.

“This thought-process will smoke out your assumptions about how much change you think the company needs,” the article said. “More importantly, it will give you a basis for dialogue with other managers about their expectations for change, which might be different than yours. In fact, one of the reasons that integrations falter is the lack of alignment among managers about what will actually happen.”

The second step that is often overlooked is doing “backward resource planning.” HBR explained that starting with the vision and then working backwards to see what will it take to achieve it can help company owners create a comprehensive and realistic business plan.

When a business owner decides to sell their company, working with M&A advisors can help them stay focused on all goals, short- and long-term. An acquisition strategy has many aspects that must be kept in mind to ensure that all parties involved are satisfied with a chosen deal.