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4 Questions to Ask Before Acquiring a Business

Business acquisition is an attractive option for business owners seeking increased market share. While a successful acquisition can positively impact the bottom line, a poorly planned acquisition can greatly damage a company’s brand and leave the business in a worse position. Approaching an acquisition must be done with thoughtful consideration and counsel. The following questions are important to consider before considering the acquisition of another business.
1. Is the business capable of making this acquisition at this moment?
Businesses considering acquisition should have a stable culture, a recurring revenue stream and a dependable employee base. If a business is in a state of turmoil in any of these areas, acquiring another business will not solve these problems. On the contrary, it will most likely exacerbate the situation. Operations should be running smoothly at the home base before expanding the business through acquisition.
2. What are the goals in acquiring a business, and will this acquisition meet these goals?
There are many reasons that could drive a business acquisition – from increasing market share to expanding product offerings. To analyze how an acquisition could meet the intended goals, steadfast research will be required to provide insight into areas including customer base, business operations, financials and company culture. If the research reveals that this acquisition will not support the business’ future aspirations, it is time to pass on the opportunity.
3. What are pitfalls that could potentially be encountered during this acquisition?
From the costs involved in the acquisition to potential clashes in management, culture and overall structure of the company, there are a number of potential pitfalls for any acquisition. An acquisition that will extend business operations outside of its existing service area needs to be carefully evaluated, as the current home office may not be able to fully manage operations. If that is the case, a key leader may need to be identified to manage the newly acquired branch, and proper education and preparation of the new manager will be vital to ensure that operations continue to run smoothly in the new location.
4. How will we effectively communicate with key stakeholders during this purchase?
Businesses have a large contingent of stakeholders – from employees to customers – who will be eager to learn what an acquisition means for them. Oftentimes, the news of a merger can cause fear and quick reactions if not communicated effectively from the beginning. An important step in the acquisition process is to secure a database of stakeholder contact information for both companies, including names, email addresses and phone numbers, to ensure that there’s an effective way to communicate with all constituents. This reduces the risk that employees and customers will hear of the acquisition through other outlets, potentially causing skepticism and distrust.
Once all of these questions are answered, not only will a business be prepared to move forward with an acquisition, but also, the company should have a strong foundation on which to build the newly expanded business. 

Bob McBride is CEO of State Systems Inc., a property protection company based in Memphis.

Posted: 1/18/2017 9:34:38 AM | with 0 comments
Filed under: Management, SmallBusiness, StateSystems

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