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Summary of the Study Results:
Acquisition Strategy
Rated: 3.7 and 3.8
Comments: key driver of alignment between buyers and advisors; if unrealistic, the plan is too general and not enough emphasis on action-related tasks. Post-closing success begins with good strategy and planning.
Deal Flow
Rated: 3.6 and 3.7
Comments: access to deal flow is a conscious effort combining communication and networking skills, strategy articulation and identification of real opportunities. Prospecting and follow-up are very time consuming.
Team Formation
Rated: 3.3 and 3.7
Comments: teams must rise to times that demand intensity, coordination, trust and candor. Find external advisors you can trust, not those just trying to get any deal done.
Engaging Sellers
Rated 3.3 and 3.6
Comments: key to the deal, knowing the sellers and their advisors motivations: i.e. the key sellers' "drivers"; "Staying in constant contact until the moment is right". Sellers tend to over-value their business and are not prepared for requests during due diligence.
Business Valuation
Rated: 3.8 and 3.5
Comments: sellers place less reliance on market comparables then do lenders and advisors. The challenge is how the comparable being used relates to today's market. Understand the 2 or 3 key value drivers and test them during due diligence.
Financing
Rated: 3.8 and 3.7
Comments: banks focus on projections, track record, relationships, a clear understanding of the opportunity given the level of risk, management team and experience, the strategy behind the deal and the integration plan. No company should start the acquisition process until they have financing to affect the acquisition strategy.
Negotiation
Rated: 3.7 and 3.6
Comments: it's one thing to agree on a price ("hand shake"); the potential for the deal to derail is real during this process. The absence of experienced advisors is a common source of deals that fail. Most targets retain less experienced advisors, making the negotiation and documentation process very painful at times.
Due Diligence
Rated: 3.6 and 3.6
Comments: due diligence needs to focus on valuation of the target and how uncertainties can best be handled in the final purchase contract. The challenge is not with the information; it's the lack of information the target does not have.
Post Sale Integration
Rated: 4.2 and 4.0
Comments: this item received the highest rating by a significant margin. Integration plans should begin at the very beginning of the acquisition process. Misplaced optimism, overconfidence in the deal and confusion with senior management surface. Acquisitions often involve competitors who add to the mistrust and anxiety. 82% of participants rated this as "challenging" to "very challenging".
Final thoughts and comments from the participants:
"Acquisitions are difficult - finding the right acquisition targets, managing egos and continuing to run a business during the acquisition process..."
"Plan on more details and value the experience of your team and advisors. Successful acquirers are those who have made multiple acquisitions."
"The use of politeness, graciousness (towards the other side) and humor are greatly undervalued in acquisition settings. Relax and be polite."
"It would be valuable for a soup-to-nuts service from strategy through integration."
*Study: Joseph Feldman, Feldman Associates 2012
by Ed Davis, Partner
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