Think you can only acquire a for-sale company? Think again. Although it may seem impossible to buy a “not-for-sale” company, a company that is “not-for-sale” simply means it is not actively thinking about selling. However if the owner receives a compelling offer, they might change their mind. Here are four reasons why a not-for-sale acquisition can be better than a for-sale opportunity.

  1. Be proactive: Rather than reacting to whatever deals happen to come your way, you approach the prospects that offer the best fit with your company. This puts you in a better position for finding quality prospects that are aligned with your company.
  2. Maintain stealth in the marketplace: You can keep your acquisition search hidden from competitors. You also will gain access to acquisitions none of your competitors are aware of because the prospects you are looking at are not advertised. Another bonus: you can avoid auctions, which often drive up price,
  3. Maximize your options: If you only pursue for-sale acquisitions, you are ignoring a large number of profitable, viable acquisition prospects.
  4. Pick Winners: Companies that are not for sale are usually in good shape. Management teams are actively engaged in a successful business and are not looking for an exit. They may be happy to stay on (if you want them to) once the acquisition is complete.

As you begin your search for acquisition prospects, I encourage you to consider “not-for-sale” companies in addition to for-sale opportunities in order to increase your chances for a successful acquisition.

*A version of this post was originally published on AMA Playbook.

“I’m not interested in selling my business right now.”

“We already have a strategic plan in place.”

“We are already talking to another buyer.”

“Why should I listen to you? I get asked to sell all the time.”

“I may sell in a few years when my company has a higher value.”

“Who are you????”

“No.”

These are the typical responses owners give when contacted for the first time about selling their business. While it can be discouraging to hear “no,” it would be more surprising to hear an owner say, “Yes, I am ready and willing to sell you my business over the phone right now!” Experienced acquirers know that an owner’s initial “no,” is simply a knee-jerk reaction resulting from surprise more than anything else.

The majority of owners of privately-held businesses, especially those that are healthy and run well, are not operating their business with the intent of selling. They are focused on growth and delivering products and services to their customers. Just because someone is not currently thinking about selling does not mean that their company is not for sale. Click to continue reading on The M&A Growth Bulletin.

This article originally appeared in The M&A Growth Bulletin, Capstone’s quarterly newsletter that delivers essential guidance on growth through M&A along with tips and tactics drawn directly from successful transactions completed in the market. Subscribe today to read the current edition and receive The M&A Growth Bulletin every quarter.

Owners are usually skeptical or defensive when asked about selling their “not-for-sale” company. In fact, many will hang up or refuse to consider your offer. If you do manage to break through and get the owner to agree to a first meeting, your job is to put them at ease, dissuade fears and communicate the strategic value of an acquisition. A positive first meeting is essential to executing a successful deal.

One of the best ways to make an owner comfortable is to meet on their terms. Let the owner pick the restaurant and meeting location. This has a number of benefits: the owner will naturally be more comfortable and open to discussions in a familiar settings and you will also learn a great deal about the owner and their personality.

Prior to the meeting make sure you do your homework and have an understanding of the seller as both a business owner and as a person so that you can discuss their hobbies, family or any other topics they enjoy during the first meeting.

Most importantly, you should behave as if you were their guest by being respectful and listening. You do not want to come across as a hostile acquirer who wants to take over their business, but rather a potential partner that will bring mutual success to both companies.

Learn more about contacting owners in our webinar “The First Date”: Contacting Owners and Successful First Meetings on April 20.

After this webinar you will be able to:

  • Explain what typically motivates owners to sell
  • Describe effective contact strategies for getting and keeping owners on the phone
  • Detail how to use market and prospect research to gain credibility with an owner
  • Outline steps for a successful first face-to-face visit with an owner
  • Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect

“The First Date”: Contacting Owners and Successful First Meeting

Date: Thursday, April 20, 2017

Time: 1:00 PM – 2:00 PM EST

CPE credit is available.

Does this sound familiar? You want to grow through acquisitions, but there are no good companies to acquire. While it may seem like there are absolutely zero acquisition prospects, usually that is not the case.

Many companies struggle to find acquisition prospects because they are focusing on only on industry partners, suppliers, or competitors they already have a relationship with. We call these companies the “usual suspects.” There’s nothing wrong with looking at the “usual suspects” for acquisition opportunities, but if you find you are hearing the same company names over and over again without getting any results, it may be time to try a new approach.

Here are four more ways to find quality acquisition prospects in addition the “usual suspects”:

  1. Market Research – In researching the market you will naturally uncover a few potential acquisition prospects. You will also have the advantage of gaining a deeper understanding of the market which will help you select the best companies to acquire, evaluate potential acquisition candidates, and negotiate with owners.
  2. Trade Shows / Associations – Both are an excellent source for finding many companies in your desired industry in a short amount of time. Walk the floor of a trade show and you’ll see dozens of companies all in one location and many trade associations also member companies listed on their website.
  3. Internal Input – Use the resources you already have. Your sales team is filled with folks who have their ear to the ground and are up-to-date on key players and new developments in the industry.
  4. For-sale Companies – Looking at for-sale companies is never a bad place to start your search. Just make sure you don’t limit yourself by only considering these opportunities. Including not-for-sale companies in your search will increase your chances for a successful acquisition. Remember, every company is for sale, for the right equation.

For more tips on finding companies to acquire join our webinar Building a Robust Pipeline of Acquisition Prospects on March 23.

After this webinar you will be able to:

  • Approach the search for the right acquisition prospect systematically
  • Understand effective research methods for identifying prospects
  • Develop criteria for your ideal acquisition prospect
  • Use tools for objective decision-making during the acquisition process

Building a Robust Pipeline of Acquisition Prospects

Date: Thursday, March 23, 2017

Time: 1:00 PM – 2:00 PM EST

CPE credit is available.

Photo Credit: patchattack via Flickr cc

Many company owners and executives know that M&A could hugely accelerate their growth. But they hold back for several common reasons. Let’s take a look.

1. “There Are No Suitable Companies to Buy”

You’re probably right—almost. There are no suitable companies for sale. That does NOT mean there are no great companies to buy. You just have to look beyond those that are marked “for sale”. Generally, it’s much better to pursue not-for-sale companies, for a host of reasons. The company is less likely to have problems; you won’t be competing with other buyers; and no one need know about the transaction until it’s complete.

2. “If a Company Is Not for Sale, I Can’t Buy It”

Every company is for sale… for the right equation. Note the word here is “equation” not “price”. Many owners would be glad to sell if they could find a buyer with the right vision, and who understands their unique (sometimes very personal) needs — for example to look after family members employed by the firm, or keep the company brand unchanged, or provide certain special benefits with the deal. Click to continue reading on The M&A Growth Bulletin.

This article originally appeared in The M&A Growth Bulletin, Capstone’s quarterly newsletter that delivers essential guidance on growth through M&A along with tips and tactics drawn directly from successful transactions completed in the market. Subscribe today to read the current edition and receive The M&A Growth Bulletin every quarter.

Some might say the best time to pursue an acquisition is when the right opportunity comes along, but they’re wrong. The best time to pursue M&A is whenever you are ready. The best opportunities are those that you seek out proactively. If you wait around for opportunity to come to you, you may be missing out.

To many it’s a novel approach, but we advocate pursuing not-for-sale acquisitions: that is, companies that have not advertised themselves as potential acquisition prospects, and may have not even have considered the option. The truth is, every company is for sale…for the right equation. Especially in the privately-held world, when a company is “not-for-sale” it simply means the owner is not currently considering selling, but they may be open to it if a sufficiently attractive vision is presented. It’s possible that up till now, they haven’t found the right buyer, or simply have never really thought about M&A as an option. If you only look at companies that are for sale, you drastically limit your choices.

By being proactive you can search for a company that meets your ideal profile and fits in with your growth strategy rather than accepting whatever happens to be on the market. If you were planning to buy a car, you wouldn’t wait for s salesman to knock at your door and hope you like what he offers. You’d decide on exactly the features and look that you want, and go in search of the closest match you can find.

Pursuing acquisition on your own terms starts with a carefully developed M&A strategy. This should complement your company’s overall growth strategy. The most successful acquisitions aren’t about cost-savings or financial engineering; they are about setting your company up for long-term growth. Acquisitions can be one of the fastest ways to grow your business and help you reach new markets and customers.

It usually takes at least one year to develop your M&A strategy, create a step-by-step plan, identify the right companies and execute and close the deal. Keep this timeline in mind when you start thinking about a transaction. So if you’re anticipating any challenges to your current growth, the time to start on your acquisition plan is not some future date when you run into an eager seller — it’s today!

Photo Credit: Insansains via Flickr cc

When meeting an owner for the first time, your goal is not to instantly sign a deal. You first want to get to know them and make them feel comfortable about selling their business to you. In order to do this, there are some important questions to ask and subjects to broach, which I’ve covered elsewhere. Today, let’s focus on some of the topics that you should avoid.

Here’s what NOT to say to an owner in your first meeting:

Politics and Religion

In general, you want to stay away from anything potentially controversial. As with family thanksgiving dinners, you should avoid politics and religion. You don’t know the owner or their perspective, so don’t risk losing the deal by inadvertently offending someone. If they do start talking about one of these sensitive topics, gently guide the conversation back to safer waters.

If the owner starts speaking about politics and you’re in agreement, it may be ok to go to down that path, but it’s always safer to let them do the talking or to change the subject.

Getting Down to Business Immediately

At dinner you want to get to know the owner, so don’t be too focused on discussing the business. Far too often leaders forget about the human aspect of mergers and acquisitions. You don’t want to barrage the owner with a list of questions from a checklist. Many owners think of their company as their baby and are selling for the first time. It’s important to remember to connect on a personal level as well.

Talk about families, hobbies or their community. Inevitably some information about the business will weave its way into your conversations, but that should not be the primary focus. You’ll have plenty of time to discuss the business in the meeting the following morning.

Financials and Other Specifics

When speaking about the business, avoid pursuing too much detail, especially financial. Remember, this is an introductory meeting so there will be many unknowns that can be determined at a later stage once you have all the information.

Although you may be tempted to, don’t talk about valuation in the first meeting. The owner may be eager to discuss price and may even ask you a specific question, for example, “Will you pay $10 million for my company?” At this point in time, you haven’t seen their financials or their operations, so you can honestly say it’s too early to tell and that you need to see a lot more to determine if there is a strategic fit.

The owner may also hone in on other specifics such as if you plan to close any locations or if you plan to keep all the employees at the company. Again, it’s too early in the process to make decisions about such things.

Overall, your goal is to keep the conversation at the right depth during the first meeting. Talk about product opportunities, cultural fit, and why the combination of the two entities makes strategic sense. If the first meeting goes well, you’ll be back for more and you can work out all the details later on.

When contacting an owner about acquisitions, don’t be surprised to hear “no.” Most owners, when asked about selling their “not-for-sale” business will automatically refuse simply because it’s unexpected. Remember, for an owner focused on running the day-to-day operations of his business, this offer is coming out of the blue. There are, of course, a number of other reasons why owners don’t want to sell including history, age, family, and community. Don’t be afraid of rejection or give up after the first try. If you are persistent, you may find the owner is open to at least talking to you or meeting with you to hear you out.

However, in some cases, despite your determination, you may find that the owner still is not interested in selling or any type of partnership. So what do you do? Do you keep calling him or do you give up?

When contacting an owner about selling his “not-for-sale” business you must be persistent, but not obnoxious. It’s important to strike the right balance. If you’re at an impasse with an owner who is not budging on his “not-for-sale” position, there are a few strategies you can employ.

Write the Owner a Letter

If the owner is still refusing to meet with you after multiple phone calls, try taking the conversation from verbal to written. In a letter, you don’t seem as pushy and the owner has more time to think through his response rather than react in the moment.

Stay in Touch

If the owner still seems uninterested after a letter, put him on a keep in contact list. We have a list of prospects that we call every quarter to check in and see if anything has changed since we last spoke to them.  A big part of acquisitions is timing and an owner who is not ready to sell today, may be ready six months down the road. When something changes in his business and the switch flips, he may pick up the phone and call you. While there’s no guarantee that the owner will sell, at least if you made the initial approach, when he is are ready, you will be at the top of the list as a potential buyer.

Move on

If you’ve tried both of the strategies listed above and still have not had any success, it may be time to move onto another prospect. You shouldn’t keep beating a dead horse and some owners are really not going to sell their business no matter what.

If you have a robust pipeline of acquisition prospects that you are pursuing in parallel, this won’t be a major setback to your acquisition program. With many options you increase your chances of a successful acquisition.

CEO Paul Villella of HireStrategy recently shared why he sold his company ─ despite not actively looking to sell ─ and the results one year after the acquisition.

Paul addressed a packed room of CEOs, CFOs and senior-level executives from the Washington-DC area at “Grow or Die: A Panel Discussion on Middle Market M&A” hosted by Capstone and Access National Bank on April 23 at the Tower Club.

Paul, who founded HireStrategy in 2000, grew the firm from a three-person startup to the leading staffing firm in the Washington, DC area and to one of Inc. Magazine’s fastest growing firms in the U.S. By 2014, the company had reached $33.17 million in revenue. Paul was focused on investing in, and growing, the business when he received an unexpected phone call about a potential acquisition opportunity from the Addison Group, a Chicago-based staffing firm.

In his comments, Paul said he had a “walk away” attitude for most of the acquisition talks. Like many owners, he was not interested in selling his company. HireStrategy was growing without the acquisition – so why sell?

Paul Villella, CEO of HireStrategy, shares his acquisition story.

Paul Villella, CEO of HireStrategy.

In our 20 years working with not-for-sale transactions, we’ve found this attitude is not uncommon. There are many reasons why owners say “no” to selling and also many reasons why they say “yes.” It is up to strategic-minded buyers to find the right equation that will change “no” to “yes.” Acquirers should remember that this equation includes much more than financial incentives.

So why did Paul decide to sell HireStrategy? “The Addison Group was willing to truly partner with us and structure the deal in a way that would allow me to continue running the business with my team,” he said. Paul and the Addison Group arrived at a solution that suited both parties.

Under the agreement, Paul maintained control of HireStrategy and, equally important, retained his core team. In addition, HireStrategy kept its own brand and his staff received improved benefits. The Addison Group was also willing to pay an aggressive multiple for the firm because it was a key part of its strategy plan to expand on the East Coast.

The staffing industry is notorious for poorly handled mergers, but HireStrategy’s transaction was successful. One year after the acquisition, the company has reached all its 2014 targets and is on track, or ahead, for all of its 2015 goals. In addition, the majority of the staff has stayed on.

During his presentation, Paul explained the process of the acquisition, including how and when he involved his investors, outside advisors, and legal experts, and how and when he communicated with the rest of his team. On a more personal note, Paul discussed the opportunities for growth not only for HireStrategy for himself as a leader.

Mike Clarke, CEO of Access National Bank, and David Braun, CEO of Capstone, also commented on trends in lending and banking, and the state of middle market M&A today.

HireStrategy’s story prompted lively engagement and questions from the executives in the audience. Our hope is that through this event and events like these, owners and executives will continue thinking about external growth as a pathway that holds great potential.

“Grow or Die” was our third event hosted by Capstone and Access National Bank.

Below are some photos from this exciting event.

Interested in strategic growth and mergers and acquisitions? Contact Capstone today.

 

Mike Clarke, CEO of Access National Bank speaks on lending trends at "Grow or Die."

Mike Clarke, CEO of Access National Bank speaks on lending trends at “Grow or Die.”

 

CEO, CFOs and senior-level executives in the Washington-DC area gather for Grow or Die: A Panel Discussion on Middle Market M&A.

CEO, CFOs and senior-level executives in the Washington-DC area gather for Grow or Die: A Panel Discussion on Middle Market M&A.

 

David Braun, CEO of Capstone comments on M&A at "Grow or Die"

David Braun, CEO of Capstone comments on M&A at “Grow or Die.”

 

Grow or Die David Braun Paul Villella Mike Clarke

David Braun, Capstone; Paul Villella, HireStrategy; and Mike Clarke, Access National Bank at Grow or Die: A Panel Discussion on Middle Market M&A.

 

When you’re pursuing an acquisition, making meaningful connections with the right people at the right companies can be challenging.

Who is the right person to contact? How can you go about contacting them? And once you do get in contact, what do you talk about to capture their interest?

These questions are I frequently hear from company executives.

One client of ours received no response after contacting both the owner and the CEO of an acquisition target about a potential partnership. He put it this way: “We have our people talking to the same ten key contacts, but there’s little to show for all our efforts.”

While he knew the right person to speak with, he was still unable to open the door to begin a meaningful dialogue. It’s not enough to know the players; you have to understand how to approach them and how to keep them interested. Here are three common questions we hear and three answers to help you with your contact strategy.

1) Who is the right person to contact?

Typically in a privately held, not-for-sale acquisition you’ll want to contact the owner or owners of the company. You might also contact the company CEO, president or another executive. Usually this information is listed on the company’s website or some secondary source of information. But first, do some primary research with lower-level employees in sales or operations without disclosing your interest in acquisition. They can provide you with additional insights into the company so that you’re fully educated and prepared when speaking with the owner.

2) Why haven’t they called me back?

Was it something you said? Maybe. Or maybe they never received your letter or email. Unfortunately you may never know why they didn’t respond. This is why I recommend calling instead of sending a letter. It’s a lot easier to get feedback from a live dialogue and to gain deeper insights. You’ll at least know they heard your message through all the clutter.  This is also a great reason for having multiple target companies… there’s bound to be a percentage of owners who never respond to your invitations.

 3) How do you keep the target interested?

Your goal during a first call is to draw the owner of an acquisition target into a conversation. Don’t try to get them to sell their company over the phone – no one is going to do that! Instead keep them on the phone by demonstrating your knowledge of their company and business and your strategic vision for a partnership (whether that be 100 percent acquisition, joint venture, strategic alliance, or minority investment).

Our clients find that they may have trouble opening doors with the correct people, even if they are familiar with many of the players in their space. These tips should help, but speaking with owners does require a certain amount of expertise and practice. Even after 20 years of experience, we still hear the word “no” on occasion. Each contact you make with an owner is a link in the chain that could lead to a prosperous acquisition. Don’t ruin your chances for a successful acquisition by making preventable mistakes. Make sure you’re prepared.

You can learn more about contacting owners in our upcoming webinar: “The First Date”: Contacting Owners and Successful First Meetings.

Photo Credit: bachmont via Flickr cc

Family Dollar and Dollar Tree finally have reached a deal to merge for $8.5 billion. This merger comes after months of negotiations between Family Dollar, Dollar Tree and Dollar General.

Family Dollar and Dollar Tree originally came to an agreement last July, but Dollar General quickly stepped in with a higher offer. Interestingly, although Dollar General offered a higher price at $9.1 billion, Family Dollar chose to merge with Dollar Tree due to regulatory concerns. Family Dollar also said merging with Dollar General would require it to divest of 3,500 to 4,500 stores.

Although these negotiations between some of the biggest names in low-cost retail have been exciting news for the public, they were probably more anxiety-inducing for Dollar Tree. It’s not so fun to watch your competitor swoop in and nearly take your acquisition after you’ve worked hard to put together a deal.

This is another reason why private, not-for-sale transactions can be advantageous. You have less risk that your competitors will pursue the same deal because the company is not-for-sale and there are fewer chances that they’ll find out about it until the deal’s done.

Like many of our clients, you may choose not to publicly announce the acquisition. Keeping the deal under wraps helps you maintain stealth in the marketplace and guard your strategic plan.

Photo Credit: Generic Brand Productions via Compfight cc

With a 70% failure rate for acquisitions, it seems like the odds are against you from the beginning. Before you get scared off, however, let’s take a closer look at what that 70% means.

The 70% failure rate is mainly based on large, publicly traded transactions because large transactions must be reported to the SEC, and information on public companies is generally available. In addition, these large transactions tend to make the news more often since people are fascinated by massive deals involving well-known brands.

Despite this focus on large acquisitions, there are hundreds of smaller, unreported transactions involving middle-market companies and privately held businesses.

We call these types of deals “taking small bites of the apple.” Instead of huge, transformative deals, which tend to be a bit difficult to swallow, smaller, strategic acquisitions achieve a higher rate of success.

Acquisitions are a powerful tool for sparking growth and may be the only way for you to reach your goals. Acquiring smaller companies does not completely eliminate your risk, but conducting multiple, smaller acquisitions, enables you to take manageable steps to executing your growth strategy.

As with any business initiative, you must take some risk to reap the rewards. Following a carefully planned strategy and a proven process will help minimize your risk and optimize the success of your acquisition.

Why actively pursuing not-for-sale companies can lead to a better acquisition than a for-sale opportunity.

When searching for acquisition prospects, most people only consider for-sale acquisitions.  Usually these are offered by investment bankers, who carry a “book” of candidate companies. Restricting your search to for-sale opportunities is usually a mistake. I encourage clients to actively pursue not-for-sale deals.

This may seem a little crazy. Why go after a company that is not for sale?  The owner is clearly not…Continue reading this post on AMA Playbook.

*This post was originally published on AMA Playbook. Visit David Braun’s author page to read all of his articles.

Sprint has dropped its bid to acquire T-Mobile due to regulatory pressure. Large, public transactions must be reported and should be regulated by law, of course, but this is an unfortunate setback for Sprint. After investing resources putting together the deal and lobbying for months, the company must walk away from it because of external factors.

We want our clients to decide whether to go through with a deal rather than reacting to a decision made for them. This is one of the advantages of privately held, not-for-sale transactions.

When pursuing privately held, not-for-sale transactions, you can maximize the effectiveness of your resources – both time and money – because you face less regulatory red tape and you can avoid the auction process. Once you find the right prospect who shares your vision for the future of the company, momentum and excitement will help close the deal.

Photo Credit: Mike Mozart via Flickr cc

“The best opportunities are the ones we’re pursuing and not the other way around.”

This comment in The Wall Street Journal from Smadar Levi, CFO of MyHeritage.com, is one I wholeheartedly agree with.

She is quoted in an article about the growing number of startups seeking to be acquired. With fewer financing options available to late-stage startups, many faced with the choice of closing shop or being acquired are choosing the latter.

For the buyers, a for-sale acquisition might seem like a dream come true. An opportunity has just landed in your lap! You don’t have to search for the company and there’s no need to convince the owners to sell. It seems like half the work is done for you already.

While a for-sale acquisition may sometimes be the right answer for your business, I’ve found that often it brings more trouble than solutions. The acquisitions you proactively seek out are more likely to match your strategic criteria than the opportunities that come to you.

The key word here is strategy, something many leaders do not consider when evaluating for-sale acquisitions.  They allow themselves to simply react to the opportunities presented to them without considering the big picture. For those who do evaluate these opportunities against their acquisition strategy, many find for-sale deals do not match their criteria.

On the other hand, a proactive approach to M&A forces leaders to review their business strategy before considering acquisition. After all, before you can search for companies that meet your strategic need, you have to know what it is.

I am not suggesting that for-sale acquisitions can never be strategic or successful. But in my experience, you will have the most success by actively searching for companies that meet your strategic need.  Acquisition is a significant endeavor, and, while many opportunities exist, the challenge lies in finding the best opportunity for your business. I believe a proactive, strategic approach to acquisition will give you the highest chances of success.

Facebook announced it will buy WhatsApp for $19 billion on February 19, 2014. There is no way that I can, in any credible means, justify or explain the purchase price because it’s absurd in my opinion. WhatsApp has no advertising revenues and charges each of its 450 million active users a yearly fee of just $1.

Putting the hefty purchase price aside, this deal demonstrates closing an acquisition is not always about spreadsheets and hard negotiation. Often it’s about two parties with a shared strategy and vision having a conversation.

While the formal deal came together very quickly, both Zuckerberg and WhatsApp co-founder Jan Koum had been in informal talks for the past two years. They met for the first time  in a coffee shop in 2012. I often say that meeting an owner of a privately held, not-for-sale company for the first time is like a first date; you want to put your best foot forward.  For Zuckerberg and Koum, their first date turned into many more until the deal was finalized over this Valentine’s Day weekend.

“Hello, I’d like to buy your company.” If this were the way I began my phone calls with owners, none of our deals would be successful.

Speaking with owners, particularly of privately held, not-for-sale companies, requires the right strategy and approach. After all, you only have one chance to make a first impression and your goal in the first call is to keep the owner from slamming the phone down and hanging up on you. Learn how get and keep owners on the phone in our upcoming Capstone webinar:  “The First Date”: Contacting Owners and Successful First Meetings.

This webinar will:

  • Explain what typically motivates owners to consider the sale of their business
  • Describe effective contact strategies for getting and keeping owners on the phone
  • Detail how to use your previous market and prospect research to gain credibility with an owner
  • Outline steps to take for a successful first face-to-face visit with an owner
  • Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect

Date: February 20, 2014

Time: 1:00 PM ET – 2:15 PM ET

Register: https://www3.gotomeeting.com/register/759491582

CPE Credit Available

 

Photo Credit: Karolina Kabat via Flickr cc

Many leaders take a reactive rather than proactive approach when it comes to M&A. They often realize that their organic growth is stagnant and they’ve got some money they can leverage, so they decide to make an acquisition. What do they do? They go find for-sale companies or respond to those that have found them. While this reactive approach may quickly yield “opportunities,” they may not be the right ones for your company’s strategy.

It’s best to first figure out what you want to achieve and what you want your company to look like 10 years from now. What capabilities would you like to add? It could be location, technology, brand recognition, etc. After you’ve determined this, then go find the right companies – whether they are for sale or not for sale – to help you achieve your vision. It’s better to spend time finding a great strategic fit than to hit the “easy” button and rush into a for-sale acquisition. Acquiring the right company that matches your overall strategy is worth the wait.

Photo Credit: striatic via Compfight cc

It’s that time of year again. The holiday season is a great occasion to spend time with family, celebrate with friends, give to charity, drink hot cocoa – and of course buy presents.  Beginning with Black Friday, holiday sales are out in full swing with retailers trying to entice consumers with the lowest prices on gifts ranging from toys to clothes to electronics.

Fixating on price is not only limited to busy holiday shoppers: For acquisitions, executives too often focus on price. Most people make the mistake of thinking that is what an acquisition is all about, but the reality is it’s more about buying the right company.

Buyers should understand there are many different aspects surrounding a deal, many of which are not financial. Sellers may find value in other incentives such as healthcare for their family or involvement in their local charity, or even in intangible assets such as understanding and trusting the buyer’s strategic vision for the future.

The fact is, you can overpay for the right company and recover. Sure, it may take you a bit longer to recoup that extra $500,000 you spent, but you will still be successful. On the other hand, you can underpay for the wrong company and never recover. Buying the wrong company brings multiple hazards.

You may save money by getting it “on sale,” but the wrong acquisition could take you in a fruitless direction, ruin your reputation in the marketplace, or compromise your technology. At that point, you could have bought it for free and still lost! It’s like buying a shirt in the wrong size simply because it’s on sale. Sure, it was cheap, but you’ll never wear it because it doesn’t fit. You would have been better not buying it in the first place.

Many executives engaged in M&A believe in creating a long list of acquisition prospects. However, the goal of your M&A process should be to find the right companies. Obviously, it’s good to fill your pipeline with prospects, but you want to be sure these prospects match your strategic criteria. What good is a long list if none of the companies fit your strategic vision?

Learn more about this strategic approach to building your target list at our next Capstone webinar “Finding the Right Companies” on Thursday, November 21. The webinar will explain the most effective methods for identifying prospects that match your M&A strategy.

Click here to register.

CPE credit is available.