Four Reasons Why “Familiarity” Should be Part of Your Acquisition Criteria
Warren Buffett said that he would never invest in something he didn’t understand. I completely agree, which is why creating an acquisition criteria and starting a search might be jumping the gun.
Instead, you may want to partner or establish a strong alliance with a printing company first.
Here are four reasons why I think Mr. Buffett would support this approach:
1. You’ll gain insight. You’re considering a potential acquisition because a company has either expertise or assets that could be a complement to your strategic positioning. But how well do their service offerings really align with yours?
The only way to answer that question is to see the company’s product or service in action. It’s not until you truly understand how their offering works that you will be able to judge potential synergies.
2. You’ll see them in the trenches. You may have an exhaustive acquisition criteria, and hold countless meetings with a potential prospect, but none of that compares to how a business performs.
It’s like hiring an employee: A resume is great, but you really need to see the person working on a daily basis. Only when you’re in the trenches with someone do you really see how they react under pressure, and how their processes truly work.
3. You may discover you don’t need an acquisition at all. In a world of continuous M&As, partnerships and strategic alliances simply don’t get their due. People think that having the majority share is critical, and that you need to only have one cook in the kitchen for businesses to merge.
However, there is a lot to be said for two businesses remaining independent, and learning how to work well together before anything as time-consuming or as permanent as an acquisition is pursued.
By working together, you’ll also see how cohesive your respective cultures and management teams really are, and most importantly, if it the whole concept truly works.
4. You’ll get a fair price. As you work with a company and see the synergies develop between the two organizations, you’ll gain a far better understanding of just how much the relationship is worth in terms of long-term dollars.
If companies don’t partner together first, any long-term projections are based purely on speculation. If you work together for a significant amount of time, however, you’ll have some data compiled, and your valuation will improve substantially.
If you form an alliance or a partnership before a strategic acquisition, can I guarantee 100% success? No, but I can guarantee you’ll improve the odds.
I had a friend who once told me that you go to college to not only discover what you like to study, but also to find out what you don’t like to study. Setting up a partnership or alliance before a strategic acquisition can help you achieve the same goal.
(Photo by Rolling Okie)
If you're looking to make a strategic acqusition, download Rock LaManna's Free Acquisition Criteria for Printing Companies. Rock LaManna provides executive coaching for printing owners looking to grow their printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan.