Look outside the firm for acquisition experience
There are very few senior executives who have participated directly in an acquisition and even fewer who have undertaken several. Given the risks involved, it is a brave business owner who takes on an acquisition for the first time. The research shows that even experienced acquirers are not immune from messing up an acquisition, therefore, what hope does the beginner have? This is one of those activities where it is better to be safe than sorry and admit that you need help from more experienced and, perhaps, wiser heads.
When you look across the acquisition process you need a wide range of expertise. It is highly unlikely that any business owner will have the knowledge and experience to undertake a competent job in all. Thus is makes sense to look for expertise in a number of different areas. We need to be able to develop a targeting strategy, undertake due diligence, negotiate the deal, manage intervention or integration activities and then manage the acquisition once the dust settles. Even the smartest acquirers know that there are legal and accounting aspects of the deal which are better handled by specialist service providers. Given the risks, you should seriously consider building additional capacity and competence across several of these areas by taking on external consultants for limited projects within the overall activity.
Consider the acquisition the largest investment you will make
While large corporations have the economies of scale to take on full time experts in areas of strategy development, due diligence, negotiation, change management, project management and so on, the smaller firm simply doesn’t have the workload across these specialist areas to justify full time staff. This should, however, not stop them from taking on specialist for a project based assignment. Better to pay for an expert and make sure the job is done competently than do it yourself and end up with a problem which will cost you dearly in executive time and money.
You might start with a firm of accountants or lawyers who have extensive experience in mergers and acquisitions in your industry. Develop the overall acquisition plan with them and set out the range of external advisors that you will need to get the task done properly. Then using their networks, interview and engage the specialists you will need. Ensure that you also take on someone, internally or externally, who can project manage the entire process as this person will need to coordinate all the different advisors and internal staff working on the project.
You have very little time to prepare
Acquisitions tend to be very disruptive. We tend to forget that they tend to occur over relatively short periods of time, are somewhat unpredictable as to when the serious activity occurs and absorb large amounts of senior executive time. If much of the day to day work can be outsourced, this will leave management to concentrate on the strategic decisions. The normal operations of the acquirer can then be continued without putting too great a strain on internal resources. Using external advisors as and when needed may also be much more cost effective in the long run.
To limit your risk as a new acquirer, you need to tap into the accumulated experience and wisdom of service providers and specialist advisors. While this may seem to be expensive at the time, the probability of avoiding an acquisition disaster will be substantially reduced.
