Buying the right company is essential, but it is difficult. It may be easier to eliminate the “wrong” companies – prospects with glaring due diligence issues such as theft or lawsuits, or even more subjective issues like a poor cultural fit. However, the decision is not always so black and white.
How can you know if you’re targeting the wrong company? If you find yourself agreeing with most of these signs it may be time to reevaluate the acquisition:
You’re pursuing the deal to justify the time and effort you have invested in it.
The resources you have spent on the deal are sunk costs whether or not you move forward with the deal. Although lost time pursuing a prospect is disappointing, it makes no sense to continue down a bad road just because you’ve been on it for some time.
If your time and effort invested so far are the only reasons to move this deal forward, stop! These are not good enough reasons. It’s better to accept the sunk costs and move on than to buy the wrong company.
You feel like you need to get this deal done, or else.
It’s easy to get a little obsessed with completing a deal. Take a minute to slow down and ask yourself, “What about this specific deal is so important? Why must it go through?”
Panicked, rash decision-making can lead to disastrous results. Go back to your strategic foundations and calmly and objectively make a decision. After you’ve taken a minute to refocus you may find you have more options than you think.
Maybe you do really want the deal because the target company has a specific capability or technology central to your strategic plan and you think this is your last and only chance to achieve that plan. You may be right, but be careful. Remember, buying the wrong company is an expensive mistake. There are likely other prospects and other ways to fulfill your strategic criteria.
Only the CEO likes the prospect company.
Is the CEO in love with the prospect while the rest of the acquisition team has reservations? While the CEO’s opinions are important, so are the opinions of others. Each team member must have a say, even when that means disagreeing with the boss.
Open and honest discussion among members of the A-Team may shed light on new issues. Should you acquire the prospect it won’t just be the CEO working with the new company – members of both workforces will need to work together. Make sure it’s the right deal for the entire company.
These signs are key indications that you may be pursuing the wrong prospect. I challenge you to take some time to consider your current acquisition prospect. If you find it’s the wrong company, you can always walk away from the deal! Remember, buying the wrong company is an expensive mistake you’ll want to avoid.