Four Common Problems with Acquisitions

4 common problems with ACQUISITIONS

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Excerpts from Mistakes Millionaires Make, by Harry Clark

Take the Entrepreneurial Risk Assessment at: www.pathwaypartnersllc.com

My name is Harry Clark and I thought I had it made.

By 2004, I had:

founded two INC. 500 companies

450 employees

a $100 million net worth

BUT I LOST

EVERYTHING

NO

RESOURCES

I realized that there were

to help entrepreneurs avoid

common mistakes

once they made it

ENTREPENEURS

That lead me to interview

30

CRASHED

that

spectacularly

CLIMBED

and

back

SHARE

I want to

what I discovered

Photo via Huffingtonpost.de

Photo via Huffington Post

Several entrepreneurs interviewed

lost tens of millions of $ in wealth

due to

PROBLEMATIC

ACQUISITIONS

In my 30 years as CEO,

I have made 6 acquisitions

and maybe half

performed well.

These are 4 key issues to consider

ACQUISITION

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BEFORE making an

#1

UNDERPERFORM

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Super majority of acquisitions

expectations

Photo via IQ Work Force

Based on acquisitions related research and

conversations with CEOs with significant

acquisition experience, about

80% of acquisitions underperform

the expectations of

the acquiring company

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Even if there is a base case, worst case

and best case scenario developed,

it is hardly unusual for

acquisitions to perform at a

LOWER level than the worst case projection.

#2

DRILL

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DEEP

Spend more time on

Due Diligence and

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spent on

One common cause for

poor acquisitions is

the due diligence

time and effort

INSUFFICIENT

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One CEO interviewed

due to his due diligence team

not confirming the details

of the fourth largest client

of the company he

LOST

just acquired.

EVERYTHING

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The seller of the company

the prices to its fourth largest

customer, giving short-term profits

(to support a higher company sales price)

only to have that customer leave

JACKED

after the sale of the company!

UP

ONE MONTH

#3 DON’T BE OPTIMISTIC

Photo via Huffington Post

Photo via Huffington Post

It’s encouraged for an entrepreneur to be optimistic,

but not in an acquisition.

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It’s better to be

REALISTIC

PESSIMISTIC

or

about the assumptions

and synergy value of

the transaction

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Optimistic projections will never

come to fruition

#4

OVER

DON’T

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LEVERAGE

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Over leveraging debt

to lower the cash

investment

needed up-front

JUST

DOESN’T

WORK

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There were several examples

where the use of

only to lose everything as a result

MEZZANINE

allowed companies to make acquisitions

DEBT

of the corporate finance world

LOAN

Mezzanine lenders are like the

SHARKS

Photo via Warner Bros

Photo via Vice.com

to make a deal happen, then it’s better to

WALK

from it

If you need mezzanine financing

AWAY

Learn more by reading my up-coming book

Or by taking the

Entrepreneurial Risk Assessment Survey at

http://pathwaypartnersllc.com/

Or by subscribing

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