So how do you ensure you get in front of companies that are potentially attractive to you? How do you find the right target? You don’t want to buy what’s for sale. You want to buy what you want to buy! Here is a simple 10-step plan that we use with clients as part of our Acquisitions Approvals Model.
10 STEP PLAN
- Be crystal clear on your positioning. Know your market segments that are the core of your growth strategy. You can build it or buy it. Acquisitions are only a tool for executing strategy.
- Define the characteristics of target companies. Include as many details as possible. NAICS code, revenue, employee numbers, geography, profit minimum, activities, age of company, ideal customer profiles, business model, growth metrics, IP requirements.
- Do basic research to make sure your dream targets exist.
- Assuming targets exist, articulate a definitive target profile based on 2 above, and add one contact person for leads. This is your Acquisition Profile. You might have several of them for different markets.
- Distribute this Profile internally to appropriate managers and externally to your advisors (clearly if it’s a confidential diversification strategy, scratch the distribution idea).
- Imagine how these types of targets would be integrated into your business (This will help refine your characteristics needed).
- Sign off priority list of targets.
- Collate basic facts on the target.
- Choose the acquisition team that will meet, assess and own this acquisition.
- Prepare your engagement strategy and contact target #1.
The M&A tables suggest we are entering a period of frantic deal making, as busy as the previous high in 2007. However buying the wrong company can live with you for ever. Improve your odds by adopting a professional process to acquisitions.
Check out my posts on Acquisitions – This is one of over 50 posts in the series – 10 Reasons Why They Fail