I've been called to the CEO's office to discuss a potential acquisition. He has found out that his main competitor is looking for a buyer.

"We have to make this deal. We can't let others snap them up. It is expensive, but it's worth it. I'll start to work on financing."

“Lets take a step back - have you thought about all the implications? This would be our first acquisition."
So many acquisitions fail, and many companies only realize it years later, once a lot of value has been destroyed.”

"We will figure it out. It's a well-managed company, with a great product. The synergies are obvious."

“I just have a couple of questions:

Is their management going to stay? Or is our management going to replace them? Would you keep the companies separate or together?

We are stretched as we are. Are the two companies a good fit?

We always thought their culture and values were the opposite of ours - how are we going to work with them? 

Will many of their people leave, when the deal is announced?

Will their clients be happy about the acquisition?

What other options do we have?

“We don't have other options. How do you find other options?"

“Take a step back - build a data driven decision-making tool - your "M&A funnel" will remove any "emotional" factors from the decision, just comparing opportunities that are already available, deals that have been made by others in recent times, or deals that might materialise in the future for us.

This will help answer many questions, and decide the best approach.”

"It sounds like a time-consuming exercise"

“It is an exercise that will test our ability to understand and value our direct competition or other players in adjacent markets that might soon become competition for us.

We might realise that we don't have much information and we don't know where to find it, but there are specialists out there,in the VC/PE space or in the consulting space, who gather this type of information as part of their job.

It is also a way to define what really counts in an acquisition, what makes it valuable for us, and what makes it difficult.

If we come to the conclusion that acquiring our main competitor is the right deal, at least people will understand why, in a factual way.

"Is this a one-off exercise?"

“In most cases, companies that decide to grow using the M&A route, will come back to the same for more.

And the side effect of continuing to study our market, our competition and all the other players, is that we can develop a better and more informed market and growth strategy.

"We agreed on the terms of the deal, in principle, and we can now go through detailed due diligence. But we know them well. Isn't this just a formality?"

“No way - this is the first and last opportunity to look at the reality in its face. And do something about it.

Hard to change and incompatible aspects discovered during the due diligence should be considered "red flags".

We shouldn't be afraid of pulling out of a deal, if things are very different from what we were told, or from what we believed, in our evaluation.

All the new important information should influence our integration plan, and should be communicated in a timely manner.

"We will build a special Due Diligence Team to take care of this phase, so we don't affect our organization. We are too busy."

“That doesn't sound right. Companies' integration starts with the Due Diligence phase – use the same “key” people during the due diligence process that will be responsible for the joint companies' integration. Ideally, the management that will be in charge of the joint organization, potentially with members from both companies already collaborating during this early phase.

"Once we complete the acquisition we will see how it is best to integrate the two companies"

“Nobody can predict the future, especially when you have to bet on people you don't know personally. But an Integration Plan is necessary from the start of the due diligence, so that you can start to test the organizations' capabilities towards the best setup. This will evolve over time, as companies stabilise and new information is taken into consideration.

"You convinced me. Let's think about every step very carefully. Is there a recipe to make an acquisition work?"

“While no one has a recipe to make acquisitions work in all cases, you can at least use the experience of people who went through many acquisitions to try and avoid the most obvious mistakes.

No matter how well you do, an acquisition is a disruptive and traumatic event – for both companies.