The Business Issue
Growth by acquisition is an excellent strategy. However ensuring that the purchase is going to add value to the existing structure is usually difficult to measure. One of the key reasons for this difficulty is the complexity of current organisations.
This complexity means that the board of directors wishing to make the acquisition cannot accurately measure the success, impact or contribution that the new structure will bring to the acquirer. The typical means used to value and measure the acquisition involve financial calculations whilst the due diligence process investigates visible facts.
As a result, the acquiring organisation uses whatever means is available to estimate the contribution. In some cases acquisitions are pushed through due to the powerful influence of a member of the board. In others, the decision is made only from the results of financial analysis completely ignoring issues of culture, fit, alignment, logistics, social, environment, vision, historic, staff and other vital factors.
The fit of one organisation into another is unique and the acquisition process should be cognisant of that fact.
In mergers and acquisitions, intangible factors are as important as the tangibles and also need to be valued and measured.
The "Yellow Brick Road" of acquisitions is littered with failures and wrecks. There is no doubt a plethora of reasons for these less than successful ventures. However there appears to be one common thread. Organisations were inevitably surprised with some factor once the actual merger became a business operation.
The acquiring organisation should be measuring the incoming organisation against the known and measurable success criteria of the acquirer. Find the sweet spot.
Building4Business provides its services, methodology and measurement toolkit to help organisations take the guesswork out of the acquiring process. The toolkit measures and compares each element against the existing organisations current operation. It is merely an additional step to be included within the due diligence process. The outcome is a series of reports, which clearly indicate whether the acquisition is a good fit for the acquirer. A detailed sensitivity chart displays those items, which will be a perfect fit, those that add considerable value and those where future problems may emerge.
The acquiring organisation should know before the acquisition which areas of the to be acquired organisation are of real value, which are of no value and finally which with some focus could be turned into a key performing asset?
With this information the acquirer will now be better informed to negotiate a more suitable purchase price, indeed even if the acquisition is an appropriate business fit!
It is not unreasonable to speculate that perhaps after utilising Building4Business's method the acquirer may know more about what they are purchasing than the company who is selling.
When seeking to add value, a seemingly unwise acquisition could be turned into a valuable and performing asset by knowing the areas of value and those requiring investment or focus before it was purchased.
Strategic change such as a merger or acquisition can now be measured. The end result is a safer path for the board of directors and surety of financial stability for shareholders.
Building4Business takes the guesswork out of the decision-making process relating to acquisitions and mergers.