Death by Business Acquisition

It’s common knowledge (or the best-kept-secret if you’re not in the know) that too many people either buy the wrong business or purchase the right one the wrong way.


This webpage shows one way this happens. (And how to avoid it.)

Most of the most fatal business buying mistakes are seeded when people are searching for worthwhile mergers or acquisitions. They simply cannot find worthwhile deals or when they find attractive opportunities they have to outbid ignorant (and competing) buyers. So, on this webpage let’s focus on searching. Below is an excerpt from one of my books: How to Prepare Yourself and Find the Right Business to Buy (231 pages).

Search for Opportunities

This is where you put to work what you learned and acquired during preparation. It’s about implementation, not planning. Proceed sequentially through these four phases.

Phase 1

Acquisition criteria. The more requirements and variables you defined (during preparation), the less time you’ll waste during search.

Advisory team. Deploy people with a proven history of working for buyers and sellers of the kind and size of deal you intend. They have facilitated deals that should and did occur. They are deal makers, deal closers.

Capability statement. Show your credentials, of course. And your financial capability to do the size and kind of deal you intend.

Phase 2

Elements of negotiation. You and your advisory team, while you were preparing yourself, can better-serve your self-interest if you deploy the kinds of negotiating techniques that are proven to work well for the kind and size of deal you intend. It is not a good idea to deploy generic negotiating techniques.

Interview technique. Communicating with brokers, sellers and their advisors is not like interviewing for a job. While you were preparing was the best time to nail down the best ways to interview people (and be interviewed).

Search strategy. There are lots of ways to find opportunities, some much better than others. Deploy the tactics you identified while you were preparing yourself.

Phase 3

Contact acquisition targets. Use the tools you acquired while you were preparing.

Phase 4

Screen sellers and potential partners. Use the timing and scripts you created during preparation.

Letter of intent. Refer to the various kinds of documents you acquired during preparation.

 


Access the Hidden Market

The hidden market is where to find unadvertised businesses for sale (or could be for sale) by-owner.

  • Searching (only) in the public market is like rowing a boat with one oar; it takes a lot of effort and you don’t get far.

No matter how experienced you are, here are a few obstacles standing in the way of you buying a business:

  • There is a horde of unemployed or inexperienced buyers; they bid against each other to create a seller’s market.
  • Only 1 out of 5 of the best companies sold are advertised by sellers or offered through business brokers.
  • Being qualified to buy a business is not enough. You must know how to find winners and achieve a done deal.

(As you can imagine, statistics, like these, vary depending upon the time, industry and the national and local economic conditions. You can easily Google the topic and find the array of data. When we counsel buyers, we tell them to take all stats with a large grain of salt, which means what matters most is the degree to which worthwhile companies can be found to match a particular buyer’s acquisition criteria. The figure we cite, here, has been most relevant to most of the buyers who hire us. Our buyers seek small and midsize companies for sale, not Main Street ventures.)

Okay, that is the big picture.

My how-to books delve into the elements of preparation and search. And then what savvy people do when they have worthwhile opportunities on the hook. You’ll read facts, tips, dos, don’ts and profit strategies in use by the most successful dealmakers and advisors.


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Email Ted J. Leverette, The Original Business Buyer Advocate ® Since the 1970s.
“Partner” On-Call Network, LLC


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