10 Questions to Ask Every Acquisition Target
70% to 90% of all acquisitions fail to achieve the results acquirers want. Why? Most often, failure is directly tied to the integration plan and frequently, to diligence that wasn’t quite as effective as it could be.
According to a 2015 industry study by McKinsey & Company, companies with the best M&A results have strong capabilities in post-close integration. As a consulting firm, we’ve found that high performing M&A firms use the diligence exercise to gain critical insight into the target company, its management, key employees, its culture, and its customer relationships. They take a hard look at not only the financial numbers, but at the intangible assets that drive a company’s success plan. Most importantly, they have tools and processes to statistically document the value of the intangible and help them see into the future. They start building relationships with the potential target throughout the due diligence process, months before close.
In every case, the expectation post-close is that the value of the deal will increase. So how do you predict future success? Here are ten questions our highest performing clients ask every potential acquisition:
1. How closely aligned is the target company to its customers, and specifically to customers’ needs and expectations?
2. Who are the target company’s best customers (those who buy the most)? How do those customers perceive the company’s strengths and areas for improvement?
3. What are the industry’s key attributes — e., why a customer selects one company to do business with over another — and how does the target company perform against those attributes?
4. What is the customer concentration? Is it good for the long-term? How much of the business’s revenues are controlled by only a select few? Is there still more growth to be had from these few customers? If so, how?
5. What is the company’s share of wallet by customer (not just market share)?
6. What are customers’ perspectives on industry competition and how the target company compares?
7. What unmet or underserved needs do customers have, not only from the target company but from the industry? Where are the opportunities that have not been capitalized on?
8. What is the cultural fit (if a bolt-on) or the cultural opportunity (if structuring a new platform)? How hard will it be for existing management and staff to execute a future roadmap that is both operationally-oriented and customer-centric?
9. What are the priorities and action plan post-close? (The acquirer and acquired should collaborate on this plan before the deal is closed.)
10. Where are the starting points? This enables acquirers to determine what the impact the acquisition has on overall performance. To do this, an acquirer should measure not only the synergistic savings and revenue Increases, but also how much improvement there is in customer loyalty, satisfaction, and share of wallet.
For more information about selling your business, Contact Jeff Adam, PE, MCBC, FRC, CBB at Adam Noble Group, LLC
Phone: (817) 467-2161
www.adamnoble.com
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During 3 decades of M&A service, Jeff Adam has successfully completed the sale of over 825 businesses and advised or completed 1,000’s of business valuations and exit plans. An entrepreneur in his own right, Jeff has started and grown 12 companies in fields including international finance, B2B services, business valuation, construction, screen printing, Mergers & Acquisitions, engineering, and manufacturing. Jeff has donated his time as a distinguished speaker at numerous national & international conferences since 1977 covering topics such as environmental services, engineering, media, craft breweries, exit planning, business valuation, charitable giving, management, business brokerage and M&A fields.
Jeff is President of Adam Noble Group, LLC, a national M&A Advisory firm, professionally valuing and confidentially selling profitable businesses owned by exit-motivated business owners to qualified strategic, corporate, private equity, partners, management, and first-time buyers. Jeff establishes rapport, builds trust, and educates business owners in the steps to meet their goals as they prepare and achieve the discreet, confidential exit of their business. Jeff exclusively represents sellers of $1M-50M value enterprises and endeavors to transfer their businesses to qualified, capable acquirers who will build upon the seller’s vision, goals, culture, and history. Jeff maintains lifelong repeat and referral relationships with sellers, their acquirers, and service providers.
Adam Noble Group has multiple M&A and business broker specialties: Manufacturing, Defense Industry, Oilfield services, Construction trades, Craft Breweries, Partnership Buyouts, Manufacturing, Service, and Wholesale Distributors.
Our M&A advisors and business brokers are all multi-industry entrepreneurs who have successfully exited their own companies. Jeff has walked in your shoes! Jeff wants to put the BIGGEST CHECK of your life in your pocket! Please contact Jeff, and he will confidentially answer all your questions.
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