August 10, 2023 //
The overall goal of the Preparatory Stage of the 3-step acquisition process is to get your business ready to face the market, and to develop a clear idea of what you’re looking for. It’s demanding, and requires a lot of precise communication and analysis, but in some ways it’s also the most fluid step in the process—you’ll need to be ready for subtle but unexpected changes in your direction and focus as your company’s needs and capabilities become clear.
Exceptional M&A Advisors will not only expect those subtle changes, they will use them to help you further clarify what you’re really looking for and adjust your strategy accordingly. This is a crucial part of the process, and often has unexpected side benefits for your company: the preparations required to plan an acquisition often breathe fresh life into your corporate vision and re-energize your existing staff as they buy into the changes that are coming.
This leads me to an important piece of advice, as the acquisition excitement takes hold.
Early on, it’s likely that you’ll be presented with several prospective companies for sale that look perfect, and that perfection will be exciting. Those first opportunities will be attractive, even tempting.
But I want to temper that excitement with a little common sense. It is such simple advice that I would say it doesn’t need repeating if I hadn’t seen it ignored, again and again. Remember this advice and it will keep you in good stead when things get heady:
Remember — that thrillingly perfect prospect may tick all the boxes you can think of, but it’s meaningless if you cannot afford it. Putting a financial and operational strain on your existing company to onboard a “perfect” acquisition is a gamble that all too often ends in disaster.
You don’t need to shop at the absolute ceiling of your spending limit in order to find an ideal acquisition. Smart advisors may find value, lower down. Furthermore, if your M&A Advisors seem to be pushing you in that direction, I would question whose interests they are pursuing.
Studies out of McKinsey have consistently and repeatedly shown that betting the farm on a big deal is not the path to the best outcome. Year after year, McKinsey shows evidence that a deliberate, structured acquisition program of two or three acquisitions per year over a longer period of time results in much better results for your stakeholders than an expensive single buy. I’ve seen this personally, in the real world, many times as well.
Every acquisition is different, and at Stillwater, we don’t make cookie-cutter recommendations from a rigid strategic template. However, if it works for your company, here is a course you might consider: a controlled series of bite-sized acquisitions at a measured pace. This approach will allow you to ingest and implement new components at a lower risk to your company. Experienced advisors will assist you in developing a plan to do so.
Don’t bet the farm on a single acquisition; it just doesn’t make sense.
At Stillwater, we place a high value on plans that make sense. It’s what makes us the wisest choice for your M&A Advisors. You can start that conversation with us here.
Written by: Douglas Nix