Friday, December 18, 2009

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.

1 comment:

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