Review from the Summit: Should You Acquire or Be Acquired? (Part 2)
Now I am going to continue to summarize Hobson Hogan’s presentation on whether you should consider being acquired or whether you should acquire another company from Day 1 of the Summit. If you have not read part 1 please do so first.
Let’s pick it up with your selling/liquidity options:
- Majority/controlling interest sale: To competitor or investment firm/private buyer
- Internal sales/transfers to next generation of management: Multi-year S-Corporation/LLC sale programs, management buyouts
- ESOP (Employee Stock Ownership Plan)
- Selling significant minority stakes with eventual control sale: Can solve difficult situations where buy-sell agreement undervalues firm, gives owner a ready buyer in cases of illness or death, transaction(s) completed at a discount
Next he discussed the key points to consider before making a corporate acquisition:
- All starts with strong business plan and big dose of humility
- Be honest about risks – most are related to executive hubris not quantitative failures of the CFO
- Plan early and implement slowly
- Maintain a strong balance sheet
- Manage assumed liabilities
- Manage risk as well as return
- Keep your hand in project selection/pricing
- Manage personal guarantees
- Just because you can borrow money does not mean you should
- Acquisitions should enhance or implement new strategy
- Acquisitions for acquisition sake will only distract management from its most important activities
- Acquisitions should support your marketing plan, enhance strengths, mitigate weaknesses, reduce threats
Before you jump into the acquisition plan you need to work on the business plan – and this entails:
- SWOT analysis
- Market strategies
- Product/service strategies
- Operational plans
- Management succession plans
- Financial projections
- Operating budget
- Projected earnings
- Cash flow and CAPEX budget
In the next posting I will finish the summary of Hobson Hogan’s presentation.