Am I paying to much to buy this company?

If you’re looking at moving your business forward, you may be considering a strategic acquisition or merger of an existing company.

You have heard on the street or received a phone call the owner of another business in your industry, is contemplating selling and may be willing to sell to you at a very reasonable price.

This opportunity can be somewhat tempting when you begin to reduce the total costs of running both businesses and create more value for the combined company.

In short, you’re looking for an opportunity where the “whole exceeds the sum of the parts.”

But buying another business can be risky. Statistically, 50% of merger and acquisition deals fail. And a recent article I read in Forbes by Frank Vermeulen suggests that percentage may be more like 70%.

These staggering statistics mean you should carefully consider both the advantages of an acquisition and the pitfalls to avoid.

Here are a few considerations for advantages.

Can value be found by eliminating redundancies and increasing overall revenues?
Taking advantage of additional distribution channels that can leverage more efficiencies with your products mix or services.

Understanding what existing technologies and business processes, would be of value or otherwise be extremely expensive to develop your own.

Can you access the human talent in this organization without the need to engage in an extensive search and hiring process?

And here it comes... some primary pitfall considerations

Possible clashes between your corporate culture the company you intend to buy. ( The human Talent)
Apprehension for both your current employees and the employees your acquiring. These employees may feel that their jobs may be in jeopardy of a consolidation (and their concerns may even be warranted).

What happens to increased debt on your balance sheet if you’re borrowing money to fund your acquisition? Could this impact your ability to borrow funds in the future for other purposes like natural growth?

Ask Zabel, and we can share our the blueprint for success and help you isolate your risk.

 

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