Acquisitions: Fill In The Gaps - Wendy Dickinson

Show Notes written by Wendy Dickinson, Catalytic Conversation$.

Acquisitions: Fill In The Gaps


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Introduction:  
A lot of you plan to sell your business one day.  Before you take that step, you will need to build a business that has value to a prospective buyer.  Some businesses recognize that their customer base has a need that gets filled elsewhere.  Or, that the business is vulnerable to certain factors of conditions that exist within the industry.  

Those owners may choose to strengthen the value of their businesses by buying another company.  There are reasons to do this, and reasons not to buy another company.  My guest, Ellen McIlhenny and I will look at the motivations behind acquisitions that build value.

This is a lot of information to take in today.  To give you the 30K’ view,I have designed an Acquisitions Tip Sheet for Success.  You can get that here.

SHOW OBJECTIVES: THE WHY

• Expert Fractional CFO, author, and coach, Ellen McIlhenny, of CFO Plus Services joins us today to give us an overview of acquisitions - the whys, the whats and the how.
• Problems and obstacles that many owners face during and after the acquisition allow you, the listener, to prepare.
• We give you the inside story on what you should know, before you choose to grow, through an acquisition.
• We share steps you could choose to take to prepare, buy and then integrate your acquisition.

KEY ISSUES: Problems You May Encounter:

• Oftentimes, the returns are disappointing to the investors.
• Integration issues can plague the acquisition - IT, HR, operations, logistics, etc.
• Challenges to the status quo in both companies can prove to be the undoing of profitability
• And, as always, the owner(s) can become distracted from their respective businesses and fail to meet their projections.
• Ellen shares her experiences with stories of some of the most common problems businesses face in choosing an acquisition target.
• Ellen identifies a few of the obstacles she has seen while working to acquire another company successfully.
• We've both seen the many ways an acquisition can fail.  As a fractional CFO, Ellen has led acquisitions and advised clients on acquisitions.  Ellen shares a few stories for us to illustrate some of those failures.

What You Need To Know - THE WHAT:
There are some great reasons to grow through an acquisition.  For example:

1. Speed - you can fill a gap, introduce a new product, and gain market share.
2. Growth through acquisition can increase market share which leads to greater brand awareness, and contain the competition.
3. You can skills, intellectual properties, and resources (like cash in some cases)
4. Financial Gain
5. Fewer barriers to entry

And, there are the cons - difficulty integrating systems, products and services, the “fit” is off, returns are disappointing, and don’t forget the ever possible reduction in efficiency, profitability, and productivity.

• Ellen and I discuss some of the indicators that companies ought to explore acquisitions.
• Ellen and I advise listeners on steps to begin to prepare for a deal or process.
• Ellen, I advise clients to develop strategic partnerships to get a sense of fit and alignment with another company.  Ellen gives us a hint of the advice she gives to clients to begin the acquisition candidate process.
• We discuss strategies, and processes companies should put into place by the time they are ready to pursue a target for acquisition.

What You Need To Do - THE HOW

Ellen gives her suggestions for steps to follow, too.

1. Determine the goal, along with the results "needed" for the acquisition to be considered a success.
2. Reverse engineer the strategy using the results.  Identify the gap the acquisition will fill, or goals achieved.
3. Calculate the cost of other options to achieve those goals versus the cost of the acquisition process.
4. Review impact of acquisition on cash flow, balance statement and overall value of the company.
5. Seek out any financing.
6. Assess the need for an intermediary, M&A attorney, accountant, CFO, all with acquisition experience.
7. Tap into the existing team for additional bandwidth to conduct the due diligence for the acquisition.  Assign specific duties and make adjustments in the task load of each person.  Reassign as necessary.
8. Create a team to onboard the acquisition to integrate IT, HR, operations, logistics, and management successfully.
9. Create a communication plan to be honest, straightforward, and acknowledge what isn't known.

Resources:

1. Acquisition Pros and Cons, by Nate Nead, investmentbank.com
2. Work The Bugs Out: Practices To Work In, & On, Your Business, by Wendy Dickinson, Publish: TBD.  Excerpt: Free Downloadable PDFs to work through.
3. Ellen McIlhenny, CFO Plus Services, website: https://www.cfoplusservices.com, 804-301-6312.  Ellen is the author of The Big Turnaround, you can purchase your copy here.
4. This is a lot of information to take in today.  To give you the 30K’ view, I have designed an Acquisitions Tip Sheet for Success.  You can get that here.

You can connect with Wendy Dickinson on FB, LinkedIn, and Instagram.

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