Opportunism is part and parcel of entrepreneurship. Therefore, it is understandable that entrepreneurs often take an opportunistic approach to business acquisition as well. But it is precisely in this area that this approach does not work. In this article you will read why.
Opportunism is part of entrepreneurship. It is therefore understandable that entrepreneurs often take an opportunistic approach to business acquisitions as well. But it is precisely in this area that this approach does not work. In this article you will read why.
Opportunistic business acquisition in practice:
A company offers itself for acquisition. There is not much time so your organization proceeds to analyze and assess the candidate. Such an analysis always takes a lot of time, effort and involves several people. In the end, you come to the conclusion: this is not a good candidate. The whole thing is called off.
Then a new company presents itself for sale and the whole circus starts all over again. It costs a lot, but the chances of success are lower. If not very low. Why? Because most candidates who present themselves just try (also opportunistically) or simply do not know your requirements and strategy or much worse: are not sales-ready.
Of course: sometimes, very sometimes, a gem comes along that you can take over in no time. More luck than wisdom! My advice is: go for wisdom. Because: by working from a well thought-out plan, a strategy, you can find out much earlier whether a company suits you – even apart from the question of whether a candidate is ‘good’!
Work from a well thought-out strategy
To assess whether it is a good decision to acquire a company, you need a clear, well-framed plan and criteria to evaluate the candidate. First, you need to ask yourself: what do I want for myself? What is my strategy? And then: what are my criteria? What are the characteristics of a good acquisition candidate? What conditions must it meet?
You incorporate this acquisition strategy, criteria, and conditions into a plan of action, which includes what should happen when a company presents itself. This not only saves you a lot of time, but also prevents everyone from working in an ad hoc manner. It makes the process much more careful.
Often there is a time limit on these processes. Then people tend to make decisions in a hurry, not based on reason but on emotion. Usually these do not turn out to be the best decisions afterwards … How much better is it if you can test every decision against criteria that have been thought out and thought through beforehand?
In summary:
Thanks to a thoughtful acquisition strategy:
- Gets you clear on what you yourself want
- Saves you a lot of time on unnecessary analyses
- You do not burden your company/people unnecessarily
- Decision-making is much more thoughtful
- You avoid disappointments in your company
Make an acquisition strategy
Are you convinced that an acquisition strategy is indispensable when evaluating acquisition candidates? If so, the next question is: how do you create one? Where to start? More about that in my next blog article.
Want to know more now? Then give Clifton Finance a call: +31 6 55853074.
By: Maarten Vijverberg