- What is the amount of capital available for an acquisition which will allow the business to maintain the required working capital to successfully operate the business?
- Will the acquisition result in expanding your geographic market?
- Will the acquisition significantly reduce competition in the market place?
- Will there be the potential for cost savings in the growth of market share, allowing the company to negotiate better pricing and support from your supplier?
- Will the acquisition result in obtaining valuable supplier contracts or a coveted location?
- What is the reasonable attrition rate and what can be done to minimize the lost of customers?
- Will the acquisition bring new product lines, addition service offerings, or technology enhancement to your existing business?
- Will the acquisition gain lots of industry talents? This could be very important in a skilled labour shortage market like Alberta’s.
- What impact would it have on your business should another company acquire this competitor?
- Will the increase in size create higher valuation multiple for your company when you choosing to sell?
- Are you, the owner, prepared and able to handle the growth? This often means: additional employees to manage and integrate into your company, reorganization to form the best teams in order to eliminate redundancy, standardization of the company’s policies, procedures and corporate culture, etc.
Each competitor can provide unique advantages as a potential acquisition target. A business owner who is prepared and understands their acquisition requirements can make decisions and move quickly when a desirable competitor is up for sale. For the business owner who is keen on acquiring a competitor, it is very important to approach each and every competitor with friendliness otherwise there would be little chances this competitor would even consider your buyout proposal. Lastly, for those seriously thinking about acquiring a competitor, there is some useful information to guide you that can be obtained from the book Strategic Acquisition: A Smarter Way to Grow a Small or Medium Size Company. Use this information to guide your decision making when such an opportunity arises.
Submitted by Siew Cheng