Of course everyone wants a bargain even the super rich, in fact probably particularly the super rich. How do you think they got rich in the first place!!
In our current economic climate, it’s almost certainly a buyers market – though in order to buy well you clearly need a willing seller. Therefore in order to get a good deal, unless you are really ruthless, a fair deal is what you should be aiming for and don’t forget a fair deal can still be a bargain.
To buy right you need to do your homework not just on your target but on you – ask yourself:-
1) Why am I buying
2) What is it exactly I want to achieve
3) What’s my maximum price
4) What are the things I will not compromise on – no matter what
Armed with this information, whether you are buying a house or a business, you will at least have set some critical parameters.
The process of acquisition is a long and painful one. Most deals take twice as long and cost twice as much as you may first have anticipated. Deal fever takes over ad buyers (as well as vendors) make compromises that in the halcyon days of the transaction no one would have even remotely considered and if its not deal fever, deal fatigue sets in, when frankly the parties involved are so sick and tired of the deal they will virtually do anything to compete the blooming thing!
It’s not a bad idea to have a contingency fund for just these purposes as 2 out of 3 deals as a minimum will need it.
The time needed to successfully complete a deal cannot be underestimated and up to 12 months is not all that unusual. If you have taken yourself out of your business to do this, don’t forget how important it will be to leave someone in charge of your own territory throughout this period.
Over optimistic projections of future business performance of an acquisition is common place. What we call “hockey stick” projections are endemic – watch carefully you don’t step into this arena and be advised that your funders will always discount any budgets you provide by up to 25%.
To make a deal work it’s essential that your staff are on board with you, both supportive and able.
An acquisition which brings about change, often phenomenal amounts, will sort the men from the boys, if only on a sheer scare factor. An acquisition can send lesser mortals off the Richter scale.
Information and lots of it, provided in a timely and understandable format, keeps everyone sane, but make sure the medium covers both written and verbal format allowing a facility to allow those involved to answer questions and provide support.
It’s sometimes quite humbling what concerns people have, including in my experience, seemingly irrational worries about brand changes, uniform allowance and working hours. One of the best ways I have seen this dealt with is by using FAQ summaries issued in advance to allay fears (helping especially those people who dare not even vocalize their concerns).
Many buyers concentrate so much on the end completion (not unsurprisingly) that post integration if often over-looked, which is proven by the fact that 3 out of 5 acquisitions fail to add value. This is probably due to the issues listed above and the failing to plan for a proper integration. Your 100-day plan post deal with the deadlines will undoubtedly help.
Having a realistic sense of proportion is also helpful, even when everything looks great. Post deal, s**d’s law says somebody or something will be waiting around the corner to trip you up unexpectedly, so complaining is not a comfort zone you should seek out; be pro-active and anticipate problems.
Jo Haigh
Head of Corporate Finance for MGR
www.mgr.co.uk
www.jo-haigh.com
About the Author
Jo Haigh
Jo Haigh is a Partner and Head of Corporate Finance for MGR, a company based in London and Yorkshire and a partner in the FDS Group, a specialist training and development business.
An experienced dealmaker, Jo specialises in putting together the right deal at the right time and in the right format for growing businesses throughout the country. She has bought and sold over 300 companies in the last 20 years specialising in owner managed companies. More >>