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How to Accelerate Growth through Acquisitions

Contrary to what you may believe, mergers and acquisitions are not limited to big companies only.

Your small company can benefit from an acquisition too.

It is our job to make sure that you do this right. In this post, we offer you the basic checklist of steps which you should use when you consider an acquisition.

Who Should Read “Let’s Buy A Company”? And Why?

On the news, you usually hear about big companies that go through mergers.

But in reality, your small company can grow by an acquisition as well.

In “Let’s Buy A Company,” H. Lee Rust explains the basics of acquisitions and lists the steps to finishing the process successfully.

We recommend this book to small and medium-sized firm owners who lack knowledge and experience in acquisitions.

About H. Lee Rust

Lee Rust specializes in helping small companies successfully grow through acquisitions. He has over twenty years of experience in the consultancy field.

“Let’s Buy A Company Summary”

Mergers and acquisitions are not an option for the “big guys” only – you can use them to grow your business as well.

However, before you even consider an acquisition, you must make sure that the following conditions are met:  

• • “There must be something to buy” – check if a sufficient number of appropriate companies exist in your field.

• • “You must be able to manage what you buy” – you need to have sufficient and skilled employees and an organizational structure that fits the acquisition.

• “You must be able to pay for what you intend to buy” – you don’t only have to have enough money to go through the transaction, but have a little extra as well, since you may need to invest additional funds in the company once you buy it.

If these conditions exist, then you can continue with your intention – but first, you must also know the ten commandments of acquisitions. If you choose to overlook them, do not be surprised by failure.

• • Leave nothing to chance. The devil is in the details so go through everything and include all risks and possible contingencies, as well as risk-management solutions in your letter of intent.

• • Be realistic about what you know and what you don’t know.

• • Never trust projections. This commandment is a follow up to the previous one. You need predictions, but do not use them as the basis for the deal. Approach them with skepticism and separate fact from fiction.

• • Evaluate cash and time in your projections.

• • Timing is crucial. Choose a time when no one else wants to buy since buying at a market peak is not a good idea.

• • Don’t do it yourself. We cannot be experts at everything. Get help: an accountant a lawyer, a corporate finance expert, et cetera. Make sure they all know what they are doing.

• • Don’t get hung up on taxes. Consider them, but do not make them the most critical part of the deal.

• • Don’t fall in love; it’s blind. Do not let your emotions do the deal for you. Be ready to leave at any point, if something is not the way you want it to be.

• • Expect surprises. You need to be prepared, but you cannot be that prepared, so nothing unexpected will happen.

• Remember that the deal isn’t over when it’s over. Instead, it is just the beginning.

Now, when you are a small company, it may be harder to go through an acquisition successfully because of some factors.

Mainly, the problems can be fit into two categories: issues connected to the lack of appropriate financial controls and financial reporting and lack of proper sales and marketing plans.

Many small business owners start their endeavors without any accounting expertise. Their basic knowledge may have been enough when the business just started out, but as it grows, their instincts can no longer guide them.

Hence, you need to understand the importance of financial reports and controls. Hire an expert.

The other thing we mentioned is the lack of marketing and sales plans.

This problem can sometimes be connected to not having a precise definition of what your business is about.

So, start by realistically defining your business – and then work on your marketing plan.

Now that we covered the basics of what you need to know when you decide to get into the process of acquisitions, we are moving on to the key lessons, where we number some other steps you need to follow.

Key Lessons from “Let’s Buy A Company”

1.      The Ten Commandments of Acquisitions.
2.      The Steps to Acquisition Success
3.      The Letter of Intent

The Ten Commandments of Acquisitions.

• • Leave nothing to chance.

• • Be realistic about what you know and what you don’t know.

• • Never trust projections.

• • Evaluate cash and time in your projections.

• • Timing is crucial.

• • Don’t do it yourself.

• • Don’t get hung up on taxes.

• • Don’t fall in love.

• • Expect surprises.

• The deal isn’t over when it’s over.

The Steps to Acquisition Success

Bellow, we are giving you the steps to an acquisition. Do not skip any of them!  

• • Write a plan

• • Gather information about potential targets

• • Contact interesting businesses, but discreetly

• • Use a confidentiality agreement

• • Demonstrate good faith

• • Assemble a checklist of information you need

• • Think of the first visit as a sales call

• • Highlight the benefits of the transaction

• • Examine the risks of the deal

• • Tell employees about the settlement

• • Write the transition plan

• • Re-examine your due diligence and closing documents

• • Move fast to capture the deal’s benefits

• • Double-check

• Plan your exit strategy

The Letter of Intent

The letter of intent is crucial. It should cover a number of elements:

• • Real estate

• • Dissipation of assets

• • Prohibitions on draining resources

• • Escrow accounts

• Good-faith money

• • Representations and warranties

• • Post-closing obligations

• • Contingencies and obligations

• • Financial information

• • Other contingency clauses

• • Exclusivity agreement

• Termination rights and closing dates

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“Let’s Buy A Company” Quotes

Our Critical Review

“Let’s Buy A Company” is filled with an abundance of easy to understand, easy to use, practical advice, which can lead any novice through his/her first acquisition.

Emir Zecovic

Emir is the Head of Marketing at 12min. In his spare time, he loves to meditate and play soccer.