In many ways, acquiring a company is a more complex process than selling one. While owners of companies may have years or even decades to plan their exit, buyers are often presented with opportunities that require them to act quickly, resulting in rushed screening, negotiations, and due diligence. This is where the importance of having a comprehensive, well thought out acquisition plan comes into play. Consideration should be given to the ideal acquisition profile that is being targeted including the target’s business model, size, geography, financial performance, valuation, and many other factors.
As General Dwight D. Eisenhower said, “In preparing for battle, I have always found that plans are useless, but planning is indispensable.” A good acquisition plan not only increases the odds of avoiding a bad opportunity but also helps buyers react to unexpected events more effectively. It’s not just about having a plan, but about being prepared.
The Buy-Side Search Process
The buyside search process involves reaching out to both companies that are actively looking to sell, as well as those that may not be in the market. This can involve direct outreach to the owners of the companies or engaging with strategic contacts and intermediaries who have access to companies that may be considering a sale. Encouraging these companies to engage in a dialogue with a potential buyer is a critical aspect of the buyside search process. Often it takes time and trust to enable a real conversation with a prospective seller about a potential transaction.
It’s important to understand that the buyside search process is not a one-time effort, but a continuous and ongoing effort to identify opportunities and build relationships with potential sellers over a period of years. The goal is to be in a position to quickly act on opportunities when they arise.
General George S. Patton once said, “A good plan executed now is better than a perfect plan executed next week.” In the context of the buyside search process, this means that having a plan in place and being prepared to act on opportunities is critical. The more methodical and thorough the plan is, the more likely the buyer is to be successful in the acquisition process. Unfortunately, even with a great plan and a perfect deal identified, sellers are known for changing their minds and preferences, so it is wise to have numerous acquisition prospects in consideration at any given time. This ensures that there is optionality and the ability to “walk away” as a buyer and focus elsewhere when a given deal doesn’t make sense.
Challenges in the Buy-Side Process
One of the challenges in the buy-side process is balancing flexibility and discipline. It is common to encounter situations where a deal has a seemingly high valuation, and a disciplined approach would be to pass on the opportunity. However, there are also circumstances where it makes sense to pay the premium, requiring a flexible approach. This balancing act requires experience and knowledge, which is only acquired through doing multiple deals and continuous learning. As former CEO of Intel Corporation, Andrew Grove, said, “Successful people are able to balance the seemingly opposite qualities of discipline and flexibility.”
While success on the buyside is certainly more of an art than a science, having a comprehensive, well thought out plan can absolutely increase the odds of success. Whether reaching out to potential sellers or engaging with intermediaries, the goal is to be prepared to act on opportunities when they arise and execute the plan with discipline and precision.
At Astria LLC, we specialize in the art of buy-side acquisitions. With our strategic expertise and a passion for precision, we help you navigate the complex M&A landscape. Contact us today and let us guide you on your path to acquisition excellence.