Avoiding the pitfalls to execute successful deals
Acquisition or buy and build is at the core of many Irish business’s strategies for growth. If well planned, executed and integrated; a successful acquisition can be a significant accelerator to organic business growth as well as in many cases offering the business access to a product, service, market, technology or capability which is more difficult to access organically.
Management teams considering acquisitions should ask themselves some key questions to aid in their evaluation of whether any particular target acquisition, or indeed an acquisition strategy in general, makes sense and is likely to be value enhancing to their business overall. These include the following:
What are some of the Key drivers of successful acquisitions?
- What is our overall growth strategy and how do acquisitions fit into this? It is useful (whether considering acquisitions or not) for any business to prepare a five year strategy and evaluate the ultimate vision for the business. The capability of the business to achieve this plan organically and the ways in which acquisitions may make sense can then be carefully evaluated against an overall well- considered strategic plan, rather than in isolation or opportunistically.
- Can we use acquisition to acquire skills or assets which are currently a gap? This is one of the most cited (and valid) reasons for considering an acquisition and typically includes acquiring equipment, technology, people/capability etc. which the business either cannot access organically or which would take significant time and investment to develop.
- Are we seeking to accelerate access to a specific target market or product area? Acquisitions as a means of entering new geographic markets is a key driver of M&A activity. Similarly acquisitions can enable a business to access a new complementary product; typically which can be sold through existing channels to market. In general, having a strong local management team or implanting a member of the Buyer’s management team into the target entity will help maximise the success of acquisitions in other markets.
- Will the acquisition improve the target company’s financial performance? Acquiring corporates often seek to acquire businesses where there is a clear opportunity to improve margin and drive better financial performance. This may be through cost cutting or by leveraging their expertise to generate superior financial returns.
- Do we have an internal acquisition champion? Having a senior member of the management team who “owns” the acquisition process and is heavily involved in assessing the acquisition opportunity, structure and potential returns alongside the company’s advisors greatly improves the chances of a successful transaction.
…well considered acquisition strategies and well prepared processes are key – Anya Cummins, Partner, Head of M&A