Strategic acquisition strategy; Matthew Figgie and Rick Solon

Matthew Figgie, Chairman, Clark-Reliance

The development of a strategic business plan requires an analysis of growth through strategic acquisition. Making strategic acquisitions is a fundamental component of a company’s business plan and revenue enhancement.

As chairman of Clark-Reliance, I get together with Rick Solon, president and CEO, and the rest of our leadership team to continue to use strategic acquisitions to grow our 127-year-old company.

Any strategic acquisition strategy should consider the following:

Evaluate companies that have products and services that can expand and diversify your current product line and overall value.

It is important to find companies that not only complement your current product line, but improve and add to the product offering. Identify companies that have products that can diversify your existing product offering but that fit into the bundle of products you are selling to a specific market or market segment. The integration of the existing and acquired product lines creates sales opportunities to all customers of the merged companies.

You should also consider acquisition opportunities that will allow you access to a different industry or industry niche but one that still fits your strategic mission.

Your core customers probably are focused within a few industries. An acquisition can act as the “introduction” for your existing products into an industry or industry segment that you have not been able to penetrate but that has good growth potential. You may need to evaluate your sales channel model, because your existing model may not be effective for the new industry.

There are a few fundamentals as you start an acquisition strategy:

1. Identify and create a list of companies that you want to acquire that can result in a market share increase, product line diversification or industry diversification. Focus on companies that complement the core strategic intentions of your organization. Create a cross-functional acquisition team consisting of members of sales, marketing, operations, finance and business systems to discuss growth and become your due diligence team.

2. If you do not have sufficient internal expertise, identify a consultant with skill and experience in acquisitions who can assist you in this process.

3. Determine the best way to contact the company you are interested in and their preferred way to be approached. Some companies may prefer a letter of introduction, while others would prefer phone contact. Someone on your team may have a relationship or contact that can open the door for discussion.

4. Construct a letter of intent to purchase the company outlining key purchase terms and conditions and an overall timeline to complete the deal.

5. Create a comprehensive due diligence checklist that your team will use to thoroughly examine or audit the potential acquisition.

6. Make sure that the company is truly a good fit as you examine the financials and learn more about the operation, corporate culture and work force.

7. Have a law firm with an expertise in acquisitions put the deal together. They know the details and can guide you through the legalities, administration and what to do when you run into problems, which is inevitable in any transaction of this type.

8. Get your cross functional team very engaged during the due diligence phase. That way, you can begin integrating the two staffs, which will help the company you are acquiring get to know the people and get adjusted to your corporate culture.

While the acquisition process is a long, tough transition for all involved, if the right fit is found between two companies, it can make a world of difference for your company’s growth moving forward.

Matthew P. Figgie is chairman of Clark-Reliance, a global, multidivisional manufacturing company with sales in more than 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies.