Business Strategy Questions: Acquisition
In considering an acquisition, there are a lot of important questions to consider, and we will only review a few here. However, these fundamental questions will help shape how to conduct research with advisors, the potential target company, and your internal team.
- How does this business fit with our existing portfolio? What synergies will be created?
- What will we be able to add to the company in order to lever the investment? How do we make sure that the combined entity will be greater than the sum of its parts?
- Why are we the best group to make this acquisition? Alternatively, why are we not the best group to make this acquisition?
- If we do not purchase this company, what will happen to it? What is their next best alternative?
- What do industry trends in this space look like? Is there consolidation or fragmentation? What challenges or opportunities do this present to us in the future?
- Is this business capable of scaling to new markets, products, or geographies?
- Does this business have a sustainable competitive advantage, or can we develop a sustainable competitive advantage if we make this acquisition?
Without answering these questions, the risk of a transaction goes up tremendously. If any of these have not come up in your team meetings yet, bring them up. When you need tough answers to these questions, consider reaching out to your internal network, or connecting with an advisor who has specialized knowledge in the market of interest.