Today, it’s time to share some thoughts on the considerations a company should take into account if and when they decide to acquire another company.

1. 4 things you
need to
consider in an
acquisition
By Suzzanne UhlandImage courtesy of Pixabay at Pexels.com

2. Expansion is a word that is constantly on the mind
of the most successful companies around the
world. They know that you must be looking to grow
if you are to keep up with continuous changes in
industries and market conditions. With that in mind,
a company which wants to increase its revenue
and portfolio will consider certain expansion
options. One such option would be to invest in
research and development to try to come up with
something novel and industry changing. Another
way to go, would be to join forces with another
company which looks quite promising but hasn’t
reached its potential yet.

3. The first choice consumes a lot of time, effort, and
financial resources. The second one means having
relinquish a share in creative and decision-making
power to someone else whom you may or may not
get along with. The latter is not something
everyone is willing to do. Therefore, there is a third
option: acquire another company. Suzzanne
Uhland would like to concentrate on this final
option. This blog has written on how to go about
mergers, facing bankruptcy, saving a distressed
company, and so on. Today, it’s time to share
some thoughts on the considerations a company
should take into account if and when they decide
to acquire another company.

4. 1. Take a close look at startups
Making an acquisition means making a
considerable investment. Startups are a good
path to take when you need to consider cost vs.
potential. Companies which are just starting to
show their true potential have immense possibilities
for future success if they are mentored right and if
the right partner comes along. You should look to
acquire a company that is within your industry, but
not direct competition. In other words, you want to
acquire a company which can add new products
or services to your already successful portfolio.

5. One thing you need to keep in mind is that startups
bring new things to the table that were not
considered in the past. With that in mind, acquiring
a startup will give you a fresh perspective on where
the industry stands and where the future of the
industry is heading. It will help you be better
prepared to face the challenges the industry will
present.

6. 2. Consider experienced businesses
Maybe new talent doesn’t appeal to you. You want
something proven and tested. No biggie. You always
have the chance at acquiring a seasoned company,
one which has already gone through the process of
striving to make a name for itself. Acquiring one such
company will give your organization a boost in credibility
and most definitely in stockholder share prices. However,
given these types of companies found a formula that
works, they may be a little reluctant to give up a
controlling interest in their baby. Besides that, you may
need to invest a considerable amount more than you
would if you consider startups. This leads us to our next
point: how much can you actually spend?

7. 3. Analyze your debt capacity
Once you have looked at several acquisition options, it’s
time to check if you can afford it. Some investors are so
confident they will have success with the acquisition that
they put all their eggs in one basket and invest everything
they have. Others are more cautiously optimistic and they
will set aside emergency funds just in case things don’t go
as planned. Whichever is your company’s case, it’s crucial
to understand how much you are willing to invest and how
much you are able to. Take a good long look at your
company’s books to determine just how financially sound
an acquisition of another company really is. One thing to
remember with any acquisition is that you are also taking
on the other company’s financial obligations.

8. 4. Look at the company culture
One final thing you must look at before acquiring
another company is the culture. How do the
employees get along with management and with
each other? Are they happy with the current
owners? Will they fit in well with a new company
culture? These are all questions you should be
asking before you acquire a company. Many
deals have gone sour because employees on
both sides could never get along because of
organizational differences.

9. Acquisitions are a great way to increase revenue
and gain more leverage in an industry. That’s why
it should be done seriously and with careful
consideration to certain issues or factors. First of
all, which type of company is more appropriate to
acquire; the promising talent or the seasoned
veteran? Then you need to see how much your
company is able to invest without going into a
financial crisis. Finally, a close look at the other
company’s culture will give you an idea as to
whether both sides can get along after the
acquisition. What happens after the acquisition is
a whole different story.