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The Integral Elements Of A Perfect Acquisition StrategyBy Expert Author: I am an experienced Senior Business Partner
Planning out an acquisition strategy involves lots of questioning in every stage. The most important of them is obviously- ‘does our business really need acquisition?’ These days, Merger & Acquisition is taking place in every small and big industry worldwide. While business acquisition has its strong points like – it can add up growth and strength in our business, introduce new customers to us, and strikes a perfect synergy between two companies; it involves certain pitfalls.
Not every company is required to pursue acquisition. We should do a proper SWOT analysis of our business before venturing out in the direction of acquisition as, if it fails, it can ruin our business in a big way.
The basic principles to expand a perfect acquisition strategy
1. Considering every aspects of an acquisition
Before thinking about an acquisition, we should assess the followings-
Whether our resources are sufficient enough to handle an acquisition
Setting the price, negotiation deals, time-schedules realistic
To have a clarity about the acquisition’s potential, to bringing out profit in our organization
2. Setting the decisive factors for ideal acquisition contender and looking out for it
This part includes- considering the type of business you want to acquire, its size, target customers, suppliers/vendors, size of manforce, location, and whether we want to buy a stand-alone unit, a part of the company, or the full company with its people etc.
Once after setting the conditions in place, the perfect avenues to hunt down the acquisition candidate should be explored. They are – industry associations, distributors, salespeople, trade shows/journals, internet to name a few.
3. Due Diligence
A Due Diligence involves investigating thoroughly the acquisition candidate in spheres like- finance, legality, marketing, and culture.
Under the financial part, checking out the assets and liability, cash flow, revenue model, growth rate of the acquired company is necessary.
Under the legal part, one needs to check whether the acquired company has violated any environmental concerns, or other laws of societal and industrial rule book in the past.
Marketing due diligence involves- evaluating the acquisition candidate’s profitability, USP and potential revenue growth.
Cultural due diligence consists of the acquired candidate’s work-culture, rewarding system of employees, appraisal policy, performance expectation etc.
4. Settling on the value of acquired candidate
This part is based on two factors, stand-alone value of the acquired business- that is made of cash flow, technology and assets; and Buyer’s economic value that is made of- the highest price the buyer can pay for the acquisition and still make it a successful and profitable deal.
5. Acquisition deal negotiation
The best way to negotiate is to seek out the help of a professional. But the rule-of-the-thumb of acquisition negotiation is- the seller should determine the price and the buyer should determine the terms and conditions.
This is a brief description about what factors make an acquisition strategy perfect. Apart from these; an open mind, patience and listening ability can set the ball rolling in a right direction for a business acquisition.
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