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Strategic acquisitions Featured

5:54am EDT June 30, 2003
The fastest way to grow your company is to acquire another one, says Robert Koenig, president of Woodbridge Group Inc., which specializes in divestitures, mergers and acquisitions, and valuations for mid-market companies.

"To be successful, an acquisition should be a win-win situation for both sides," says Koenig.

But an acquisition is not a vehicle for solving a company's financial problems.

"You should have your financial house in order before going after another company," he says.

The more capital you need to acquire a company, the lower your rate of return will be.

He also advises clients to make sure they have the management structure and other resources to run the acquired firm.

"Acquiring the company shouldn't create more problems for you," Koenig says. "You need to make sure you have the time to devote to it."

In fact, says Koenig, when you are interested in acquiring a company, look for a firm that can expand your market geographically or with additional, related products or services. You should be able to see ways you can improve that company's efficiencies. And it helps if the two companies have similar corporate cultures.

"You really need to do your homework," Koenig says. "Find out as much as you can about the company. Talk with the company's accounting firm, law firm and others that it does business with."

Once the acquisition begins, utilize the expertise of your accounting and law firms to ensure a smooth transaction. Then give it time before making widespread changes.

"The belief is that the buyer knows more than the seller," Koenig says. "They go in with pre-set ideas and start making changes as quickly as possible."

Unless the company was in trouble when you purchased it, it is better to go slowly.

"You'll get a higher rate of return if you don't make too many changes too quickly," says Koenig. "A better strategy would be to develop the company's strengths and gradually improve the weaknesses."

If you make changes too quickly, you could lose valuable personnel.

"Eighty percent of what you're buying is the employees," Koenig says. "You don't necessarily want them to leave. You aren't just buying bricks and mortar.

"You're making a big investment, so go slowly and don't blow it." How to reach: Woodbridge Group Inc., (800) 567-1119 or www.woodbridgegrp.com