Making Acquisitions Work
Critical Acquisition Factors (CAF'S) should be analyzed for any proposed acquisition and should be integrated into the overall evaluation process.
Technology
- Technical capability to make innovative improvement in production processes
- Product innovation capability
- Capability to use the Internet to disseminate information, take orders, or deliver products and services.
Manufacturing
- Low cost production efficiency
- Quality processes and supporting systems
- High utilization of fixed assets § Access to adequate supplies of skilled labor
- Low cost product design and engineering § Flexibility to manufacture a range of products and to allow for custom orders
Distribution
- A strong network of distributors/dealers
- Low distribution costs
- Fast delivery and/or Just-In-Time services
Marketing
- Fast and accurate technical assistance
- Breadth of product line and product selection § Merchandising skills
- Clever advertising
Skills
- Superior workforce talent
- Quality control knowledge
- Design expertise § Technology expertise
- Ability to get newly conceived products past the R&D phase and into the market
Organizational Capability
- Superior information systems
- Ability to respond to rapidly changing market conditions
- Superior ability to employ the Internet and other facets of E-Business
Intangible
- Favorable image and reputation with buyers
- Overall low cost, not just manufacturing § Convenient locations
- Access to financial capital According to a survey on
“Making Acquisitions Work,” there is one objective most likely to lead to a successful acquisition: The critical objective should be to build on core competencies and strengthen the current business. On the other hand, deals fail due to: overestimating value, paying excessive premiums, and inadequate planning for external forces. Successful buyers understand these principles.
[Alternately: As a potential seller you create value by making improvements in key areas that will enhance the chances of a successful acqusition of your company.]
The odds of success are much greater if you consistently focus on the seven key success factors. By developing a stronger set of competencies, the post acquisition company is better able to handle both the threats and opportunities that external forces create.