It can be tempting to quantum leap growth by buying another company and as a follow up to my post – the stunning failure of acquisitions, I’ve noted some more factors worth considering:
- Almost all research done by PWC or Deloittes points to around 85% of acquisitions being a failure in the eyes of the acquirer.
- Research conducted by Cass Business School, covering 12,339 deals including 2917 acquisitions of distressed companies from 1984 to 2008 concluded that price was not the determining factor for success but that post acquisition integration was the key.
- In fact specific research done on experienced acquirers revealed that only those that invested in postmortems after the deal got better at doing deals. Which of course we all know, it’s not so much how much we do of something, it’s how we much learn from each time we do it.
- Diversification can be a bad idea accelerated by the technique of acquisitions. Laidlaw, the largest school-bus operator in North America bought heavily into the ambulance business in the 1990s. Ambulances are not transport businesses they are medical businesses. Big mistake.
- Remember acquisitions are not a strategy they are a tactical technique to achieve a well thought through strategy. First establish your unique positioning and then use various techniques to be remarkable in that space.
- Buy what you want to buy not what is up for sale.
- The most expensive acquisition you may ever make is the $1 price tag purchased out of Chapter 11 because the post acquisition costs to fix it run into the millions of dollars.
- Be prepared to train yourself to become an acquirer. Buy in or recruit key people to execute alongside your team.
The Portfolio Partnership designs and executes acquisitions for clients using our Acquisitions Approvals Model based on over 20 successful acquisitions covering many sectors including software, recruitment, manufacturing and service businesses.