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.