Most business owners consider making acquisitions as a growth option. Most experienced acquirers will learn more from their mistakes than from their success. This is because “experience is the best teacher“. Here are four common pitfalls in acquisition
The Common Pitfalls
1. Non-Comprehensive Due Diligence
The application of non-comprehensive due diligence will be the first mistake that has a fatal impact. The application of due diligence must find everything you need to know about business, market, operations, customers, prices, management, legal etc. So that the application is not partially but comprehensively.
2. Risk to Losing Biggest Customer
Acquisitions become much less valuable if the target company loses its biggest customers during the transaction. To prevent this risk, you’ve got to research and ask the right questions and get an understanding of the top customers and keep their commitment to the new organization post-close.
3. Getting Too Emotional in The Deal
Save the passion for the implementation in the days after close. Getting Too Emotional in the deal will make you can’t make a best deal about price, management, or everything deal in acquitition. So that in the process acquisitions to keep calm until make it the best deal.
4. Bad Price Deal
Offers need to be benchmarked against the market, risks quantified, and sensitivities analyzed. If the combined businesses in the worst case scenario doesn’t generate an ROI on the purchase price (without earn-outs) greater than the buyer’s cost of capital, the price is too high. If you can’t work it out with the seller, don’t walk away, run. Outside advisors skilled in this area can be very helpful in getting all parties to understand the issues and can enable a successful close or quantify the sensitivities of alternative outcomes.
5. Strategic Acquisitions Fail Due To Poor Implementation
According to Scott Whitaker of Global PMI Partners, who has extensive experience on integration of acquisitions, 70% of all strategic acquisitions fail due to poor implementation. Post-close communication to customers and employees, branding, and integration plans are critical. A communication plan to the employees and customers at the time of close is imperative and will help explain why this is a positive strategy.
These mistakes are not to be forgotten but will be things to avoid when find Potential Pitfalls in acquisition. So that the experiences and knowledge must learned and practice to do it right. We are ready to help you through have various trainings to equip you with proper understanding regarding acquisition and learn the experience from the high calibre trainer. So, you can master the ability to avoid common pitfalls in acquisition. Check our upcoming events and join to increase your skill (Click Here). (SIF)