Four Common Problems with Acquisitions

4 common problems with ACQUISITIONS

Photo via Iamjekker.com

Excerpts from Mistakes Millionaires Make, by Harry Clark

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

http://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

Photo via Iamjekker.com

BEFORE making an

#1

UNDERPERFORM

Photo via IQ Work Force

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

Photo via Shutterstock

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


DEEP

Spend more time on

Due Diligence and


spent on

One common cause for

poor acquisitions is

the due diligence

time and effort

INSUFFICIENT

Photo via Deposit Photos

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

Photo via iStockPhotos

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



It’s encouraged for an entrepreneur to be optimistic,

but not in an acquisition.


It’s better to be

REALISTIC

PESSIMISTIC

or

about the assumptions

and synergy value of

the transaction

Photo via Bigstockphoto.com

Optimistic projections will never

come to fruition

#4

OVER

DON’T


LEVERAGE


Over leveraging debt

to lower the cash

investment

needed up-front

JUST

DOESN’T

WORK

Photo via Fotolia

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

And remember: to my blog

sharing is caring



Business

Four Common Problems with Acquisitions