Saving success

Companies acquire businesses for a
variety of reasons, ranging from
acquiring talent, processes, proprietary technology and brands, to leveraging
their ongoing operations.

Regardless of their reasons, buyers have
to address several key issues during the
acquisition process. Among them are how
to find the right company to acquire, how to
identify and avoid the pitfalls inherent in
taking on a new business and how to
ensure success with the acquisition.

There are challenges at every turn in the
process, most of which can be overcome
through the creation of a highly skilled
internal and external advisory and integration team that makes the acquisition as
seamless as possible, says Gregory J.
Skoda, CPA, the co-founder and chairman
of Skoda Minotti.

Smart Business spoke with Skoda to
learn how companies can identify and
leverage acquisition opportunities, put the
right advisory and integration teams in
place and enhance their chances of success
in the process.

How do buyers find the right company, or
companies, to acquire?

The key is to network as diligently as possible to identify and contact companies in a
market or in a product line that might
make good acquisitions. Buyers never
know what they are going to find. If a business owner doesn’t know buyers are looking, both parties may lose out on some
great opportunities.

Be persistent. Some successful buyers
have simply picked up the phone, reached
the owners — not necessarily on the first
call — and eventually acquired a business.
Once a potential acquisition candidate has
been identified, it is as simple as talking to
everybody they know who is in the information flow to learn about the company.
That could include the intended acquisition’s employees, lawyers, accountants,
insurance professionals and bankers —
anyone who has knowledge about its
strengths, weaknesses and markets.

Additionally, companies can go to the
Internet for information, look for information from any kind of association, franchise
networks, investment bankers or business
brokers, and make cold calls.

Why should buyers consider acquiring a
business that is in trouble?

Buyers should not automatically avoid a
business that is in trouble. Companies that
are in trouble can represent perfect opportunities for the right buyers. Buyers have to
work to understand why the company is in
trouble, determine if it is salvageable, and
ascertain what it is going to take in talent,
time and capital to turn it around.

Discovery and due diligence may prove
that the company is in trouble simply
because its growth has been ignored or mismanaged. It may be that the business was
great when it was a $5 or $10 million business, but its managers are really not capable of running the $20 or $30 million business into which it has grown. A buyer who
really understands that size of a business
can help take it to the next level. It is critical for buyers looking at a business that
might be in trouble to do due diligence to
understand thoroughly the issues that have
led to its difficulties.

How can buyers fully leverage the opportunities presented in an acquisition?

There are several ways. For example, they
have to develop a clear understanding of
why they are buying a business — it could
be one of many reasons, including acquiring
new talent, improving processes or expanding their customer base. They must have a
clear idea of exactly how much money, time
and talent capital they will need to accomplish the goal that they have set forth for the
new business. Perhaps most importantly,
they have to plan specifically how to integrate and run the new company. Failure to
think that process through can have a
tremendous negative impact on both the
buyer and the acquisition. Another key is to
avoid shortcuts in the acquisition process.
Some buyers rely on themselves too much
in the purchase and fail to evaluate the
opportunity properly. They should not rely
only on their own due diligence in deference
to working with professional advisory and
integration teams to complete transactions.

How does the integration team contribute to
a successful acquisition?

The key is to put together an integration
plan and team early in the process and make
sure every member understands what the
buyer is getting into. There has been more
than one acquisition that has failed because
the owners or senior management of a business bought a company without ever assembling the right internal and external advisory team and then spent the first few years
after the acquisition trying to figure out how
to put the proverbial round peg into a square
hole. Putting the right integration team
together can help buyers avoid making too
many assumptions about the acquisitions. It
is better for buyers to know everything they
can about the new business before the
acquisition process is completed. They have
to get to a place where they can take advantage of all the knowledge that is available.

Assumptions can kill success. An integrated approach to acquiring and running a new
business can help make the most of it.

GREGORY J. SKODA, CPA, is the co-founder and chairman of Skoda Minotti. Reach him at (440) 449-6800 or [email protected].