How should I handle an unexpected opportunity to acquire a company?

A business I’d earmarked for possible acquisition in the future has been offered to me now for a very decent price. I’d planned to concentrate on developing core business this year before looking at acquisitions in 2006. I’m worried about losing focus but am tempted by an opportunity that appears too good to turn down. What should I do?


A. Martin St Quinton of Azzurri Communications writes:

This is an interesting dilemma and one that comes up fairly frequently in the acquisition arena. However, my specific advice in this instance would be not to proceed with the acquisition right away.

If you’ve planned to focus on developing your core business in 2005 then this is precisely what you should do. Jumping at this a year early just because it appears ‘too good to be true’ could be a very costly decision. Unless your core business is in excellent order, making an acquisition based on circumstance alone is invariably the wrong move. Industry is littered with examples of acquisitions that have gone wrong, purely because the acquiring company wasn’t in good enough shape when it attempted the acquisition.

 

What I would advise you to do, is meet up with the target company and the directors and explain to them honestly that you are very interested in acquiring their company in the near future and explain what a good business partner you would be. After all if the target company has been in business for a number of years, delaying it for a few months in order for it to be acquired by an excellent partner i.e. you, may well be worth the wait.

Bear in mind, acquisitions take on average 12 months from first meeting to completion anyway, so by starting talks now you may well be able to land the deal in 2006.

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