Let's Make a Deal

Many companies are focused on growing through acquisition, and those with a lot of experience are starting to get good at it. However, companies still want to know whether or not a strategy of mergers and acquisitions is a smart approach in today’s economy. Do acquiring companies outperform those who are continuing to focus on organic growth? When is the right time to acquire? Will my company get a better deal today than I will in 2011?

Some experts say that “deal-making” companies are in fact outperforming others today, particularly when it comes to cross-border deals. Others stand firm on the belief that making acquisitions in today’s economy is still too risky.  Recently, Forbes released a list of the “Top 10 Deal Makers in 2010”, adding to the commentary of whether or not making acquisitions is a smart decision now and in the near future.

Those who believe that now is the time to “make a deal” should keep these success factors close at hand:

Know the risk of the customer base you are buying. It is extremely critical to take the due diligence process seriously, investing appropriately in order to make a sound decision. This includes predicting the future loyalty and growth of the customer base, in addition to understanding historical trends.

Find the hot-spots. An acquirer doesn’t have to know every single area that needs improvement within a company they are hoping to purchase, but having indicators of weak areas or hot-spots will give a clear indication of whether or not that company is a good fit. If customer support has always been a weakness for the acquirer, adding more customer support problems will only create more headaches (not to mention risking greater financial losses).

Gather customer comments. Simply gathering comments from the customer base that an organization would like to acquire can provide clarity to any current feelings. Tone comes through clearly in comments customers provide, and typically can shed a lot of light on areas that could have already been a concern.

Gathering insights from a customer base that an acquirer can analyze during the due diligence process should be done by a third party to keep neutrality. It is something that can be done fairly quickly and is an absolutely critical component prior to making an acquisition.

Are you thinking about making a deal? Do you have all of the information you need to make a good decision?

Katie Kiernan
Vice President, Consulting Services

Comments for: Let's Make a Deal

Name: Peter C Houlahan
Time: Saturday, November 13, 2010

Great insight. Really valuable. I'll keep you guys in mind next time we are looking at an acquisition!

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