| After nearly five years of struggling to turn a | | | | to matter. Seems to, because a deal never |
| profit, the man who had engineered the ill-fated | | | | matters more or less based on how much energy |
| deal sat down with the 25 people he had | | | | you have put into it. Yet emotional involvement |
| personally promised to keep in his employ, and | | | | based on how much time, energy, or money has |
| fired them. What should have been a terrific | | | | already been invested is one of the most |
| business opportunity had tormented him since | | | | common reasons business owners proceed |
| nearly the day after he had purchased his direct | | | | against their better judgment. Would you rather |
| competitor. He could describe in detail every | | | | spend $10,000 + $1.5 million on a bad investment, |
| problem they had encountered. If only he had | | | | or $10,000 and not a penny more? |
| been able to predict the pitfalls he would have | | | | Another reason for emotional involvement is |
| avoided an expensive -- and painful -- mistake. | | | | competition. Whether the target company is a |
| The national business press is filled with M&A | | | | direct competitor or whether there are other |
| (merger & acquisition) stories, mostly | | | | companies competing with you for the acquisition, |
| concerned with how Fortune 500 companies | | | | never let adrenaline and testosterone get in the |
| regularly buy and sell their various divisions. But | | | | way of clear thinking. It's only a good deal if it's a |
| small and mid-sized business owners are | | | | good deal. |
| frequently in the M&A seat. In the world of | | | | If you are not emotionally involved, and your |
| business acquisition, where experience in buying | | | | financial analysis has been carefully conducted, you |
| and selling businesses counts more than any other | | | | should know what the company you are |
| skill, small and mid-sized business owners are at a | | | | attempting to purchase is worth to you. To you, |
| disadvantage. | | | | because it may be worth an entirely different |
| Though there are many reasons for a failed | | | | sum to another company with different |
| acquisition, the most common reasons can be | | | | operations and customers. Set a firm price limit, |
| spotted and mitigated at the outset. The following | | | | and do not get pushed any higher, unless |
| four M&A missteps can doom a business | | | | information is revealed during the negotiation |
| owner to the scenario at the beginning of this | | | | process that clearly demonstrates how much |
| article: | | | | greater your cost savings and revenue growth will |
| 1. Focus on revenue growth related to synergies | | | | be (hint: this is fairly unlikely). |
| without commensurate focus on potential cost | | | | Finally, combining two companies is always more |
| savings. | | | | difficult than business owners anticipate. However |
| 2. Emotional involvement, leading to a belief that | | | | much attention is paid to the financials, operations, |
| the deal has to be done. | | | | and marketing, conflicting cultures are often at the |
| 3. Failure to set firm price limits based on careful | | | | heart of failed mergers. Careful assessment of |
| financial analysis of the most conservative possible | | | | the cultural challenges will prevent a lot of anxiety |
| outcome of the deal. | | | | later. |
| 4. Failure to analyze the cultural ramifications of | | | | If you have already made an acquisition that is |
| blending two different organizations. | | | | giving you heartburn, and you recognize yourself |
| It is easy to get excited about synergies when | | | | in these four missteps, don't despair. Turnarounds |
| considering an acquisition, and it's tempting to | | | | are possible with the right expertise and a lot of |
| focus most of the attention on the revenue | | | | hard work. But if you are just starting down this |
| growth that will occur. Be your own wet blanket. | | | | path you would be wise to seek the advice of an |
| Analyze the advantages of the deal if revenue | | | | expert. In the world of acquisitions and mergers, |
| growth did not occur and the only benefit of | | | | expertise counts. |
| synergy was cost savings. Is it still worth it? | | | | (c) 2008. Andrea M. |
| The more you invest in a deal, the more it seems | | | | |