I have worked our way from some thoughts around who might be a good candidate in purchasing a company through the Tactical Organization of the deal and an Integration Plan. I want to return to the strategy to flesh this out some more.
First off, I want to say that the overarching categories I used before to describe why an acquisition might be on the table were very high level. There was not a lot of detail that went into describing each of these. The reason was that the post was designed to stimulate thinking around good candidates, not be a strategic plan.
As I circle back to the plan, one has to understand where acquisitions make sense. You will often here: "1 and 1 have to equal 3". By that, people mean that the combined entity has to have some significantly higher value than the two firms do separately. The reason is simple. Any kind of transaction involves some risk. Integration costs money and focus. Key people might exit. Customers can be unhappy with the introduction of a new partner. There are many things that can happen. And the purchaser will be spending significant resources to execute the transaction. You must compare this to the opportunity cost of spending those same resources on expanding organically. That is why the strategic plan has to be clear and direct.
The core of that plan has to be change. If the two businesses are going to run the same as they were separately, then there is no "synergy". There will be some savings - 1 CEO instead of 2 - but is that worth the risk involved? Thus there needs to be something new done to make this work.
So, next time I will be posting about how to think about some strategic alternatives and how to create a plan to execute.
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