Acquisitions: The Dangerous Game – How to Avoid Fatal Mistakes

Posted on: August 17th, 2017

Acquisitions can be extremely beneficial, allowing you to gain customers, products and growth. As enticing as it sounds, acquisitions can also be a dangerous game, if not managed properly.

A holistic due diligence approach involving operational, financial and management planning is the secret to avoiding fatal mistakes.If properly executed, your diligence will lead you to the real issues and the important areas to focus on post-closing.

As intensive as your due diligence may be, there will still be plenty of unknowns. What you do know, though, should cultivate a sense of security before you commit.

You should prioritize quality of diligence over quantity of diligence and focus on the most important aspects of the deal. Your capital plan and your operational plan are critically important as they facilitate the integration.

Make sure you provision the right amount of capital to close and to build the combined companies. Acquirers frequently underestimate the level of finance needed.

We believe that growth capital is an essential part of all acquisitions and needs to factored into the sources and uses. It’s also important to analyze the chemistry between your current business and the prospective target.

It is constructive to think of your current business as your greatest priority and this new acquisition as something that will enhance it. Create a strategy for the future and consider how customers, organizational culture, and financial history will mesh.

Wherever you see stress in the business model from the combination of the two companies, consider investing resources to provide more support. To capture that elusive unicorn of synergy, you must have a resource rich ecosystem that supports the two companies.

Before game time, figure out who you want on your side. Find the opinion leaders and influencers and convince them to join your team.

These individuals can give you both valuable insight on your goal, and possibly support your growth post-merger. Attract Capital is a financial advisory firm that has been assisting professionals in merges and acquisitions for over 25 years with their distinguished knowledge of private capital markets.

We can work with you to organize the best possible acquisition funding structure. With a lender platform of more than one hundred acquisition-financing lenders and a proven workflow process, we enable you to attain more capital at a lower cost.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.