Change - Part 6

One headline I have become numb to is the ‘We have just acquired’ announcements – they’re mostly BS spin. I have participated in five acquisitions over my years as a business owner and they had their pluses and minuses and I could provide a spin either way you want to hear it – but let’s be frank – at the end of the day it was a lot of work, stress and expense along with a lot of change management that likely was not equal to the gains received.

I asked ChatGPT and it wrote, “One commonly cited statistic is that about 50% of mergers and acquisitions fail to deliver the expected value or create shareholder wealth. Factors contributing to these outcomes include overpayment, cultural mismatches, poor integration planning, and unrealistic expectations.”

That sounds about right to me.

My favorite acquisition experience was the one where all the owners were at the closing, all the paperwork was done, and the lawyers just had us all sitting at a large conference table signing documents. Suddenly, the seller noticed something he had missed, and didn’t like, regarding royalties and he got up and walked away from the table, refusing to sign. We all just sat there and stared at each other in disbelief for almost an hour as his wife convinced him to come back to the table and sign.

My comments on making acquisitions are:

1) You have to go through the exercise of meeting, interviewing, discovery, etc. for at least five times what you receive. So, for the five deals I did, I easily had 25+ other companies I looked at closely. That is a lot of time spent that I was not driving revenue in other ways.

2) You never get the revenue bump you expect. I used to say 80%, then 60%, now I tell people to do your analysis on 50% or less and be pleasantly surprised if you exceed that number.

3) Most companies are selling because they are in distress or because they know that they might be in distress soon.

4) The biggest value you will get out of an acquisition is the people – pure talent.

5) Avoid at all costs buying any of their equipment, buildings, or inventory unless there is a clear advantage to doing so.

The message here is to be sure you have a clear understanding of the cost of change. Not just financially, but of you and your leadership teams time and the stress on your employees. How much more revenue could I have brought in if I were out meeting with prospects and customers more as opposed to sitting in these endless meetings with potential acquisition targets. Be honest with yourself and don’t let the thrill of being the acquirer or acquired distract you. Acquisitions are the king of change – on all levels.

Signed,

Change (Let’s get it done)