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Acquisitions - How to make a return…

Mercer & Hole have an inside track on making acquisitions work - our partners have the direct experience of spending their own hard earned money. We have acquired several businesses including smaller practices and whole departments from one of the international accounting firms. We have made this a success by applying our long standing philosophy – ‘Big firm expertise, with a personal service’.

Many experienced and successful entrepreneurs can find the acquisition process difficult – quick judgements need to be made throughout the process and for the inexperienced it is easy to make well meaning but poor decisions. There is a frequently quoted statistic that 80% of acquisitions fail to add value. My experience is that this figure does not reflect the SME sector – the vast majority of deals I have seen are beneficial for the buyer. Despite the reduced relevance for SME’s, the statistic does make us aware that caution should be exercised.

The first questions to consider is whether an acquisition strategy is appropriate in the first place. The buyer must keep asking “why am I doing this?”. Would it be more cost effective to pursue organic growth? Even if a company you are familiar with, is offered at a bargain price, you should consider what value it will add. Look at yourself and inside your business - do you have the necessary capabilities - management time, systems / accounting capacity and (of course) funding? If an acquisition can not be controlled after completion, it will be a huge drain on time, resources and profits. It also crucial to consider the state of the sector and the wider economy. Is the sector growing / contracting? What economic / political / cultural policies will have an affect? 

Once a decision has been made to adopt an acquisition strategy, the second key area is where to search. I will return to this at a later date - and will answer the frequently asked question "how do I buy a company"



Date: 23rd January, 2009
Author: Julian Dobbin


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