How to build (and prepare for) an acquisition

Don’t let subpar practices stifle your future opportunities.

Not all businesses begin with the same intentions or fiscal goals, and few end up where they originally aimed. Although these uncertainties might sound scary, they don’t need to be. The truth is that businesses can be functional for years without ever being ready to be sold — even if that always was the end goal!

This disconnect can negate years of hard work and planning. The last thing you want is for the big offer to finally be on the table, only to find your team and systems unprepared for the acquisition process.

Positioning your business intelligently will save you from future headaches and potentially net you a hefty pay-out as well. By preparing yourself years in advance for possibilities, like an enticing acquisition or merger, you can rest easier at night knowing you’re ready for any opportunities that may arise.

Create a well-balanced portfolio.

Although experts argue endlessly about where the true value of any business lies, most agree that buyers feel more comfortable with companies who have diversified their portfolio.

In a recent conversation with Rudy Medina, founder of Next Space Development, we discussed reliable ways businesses can expand their portfolio. Rudy has handled over $1 billion of acquisition and development projects, and he has always stressed — to his team and clients alike — to keep both today and tomorrow in mind.

Rudy has found that real estate has been one of the most popular methods for businesses to diversify over the past 10 years. Further, he explained how if you pass on a time-sensitive opportunity to expand, then it’s unlikely you’ll get another chance before the next acquisition juncture — if ever.

While your natural inclination may be to stay within your niche, by adding an attractive and unique aspect to your company you are better positioning yourself for future acquisitions.

Be aware that diversification is not without its own risks. There are countless examples of ill-fated forays, like Quaker Oats’ entry into the fruit juice market. Avoid expanding just for the sake of expansion, but always remember that a company with a balanced portfolio is more likely to be purchased than a one-dimensional business.

Run a tight (and tidy) ship.

Keeping detailed records on your assets, properties and transaction histories might seem simple and obvious, but too often records are kept sloppily or haphazardly. Even worse, the process of correcting years of neglect is painful and time-consuming.

Start today with due diligence on everything from company purchases to month to month fluctuations in overhead costs. This gives an important card to play later. In today’s market, those interested in purchasing your company are going to be data-hungry. The more information you can provide a prospective buyer, the more comfortable they will feel in the overall purchasing process.

By being able to answer even the most inane and detailed questions, you’ll alleviate your buyer’s potential concerns. If you do not have these answers, then their imagination might fill in the blanks in a negative manner, or worse yet, they could assume neglect or deceit.

Sure, you might be able to scramble and slap together a decent history of your company last minute, but any savvy potential buyer will be able to tell a rush job from a real one. This small detail could be the difference between receiving an acquisition offer that floors you and one which underwhelms you.

Right from the get-go, control the narrative.

While it is easy to assume that the facts will speak for themselves, the reality is you are responsible for the narrative. Practice your presentation with an internal team routinely and don’t pull any punches. Have an explanation ready for any anomalies in your company history to ensure you aren’t caught off guard during an actual pitch.

Studies show that steady growth is among the most valued traits in most acquisitions. Buyers want to be shown a clear connection between how their decision to buy will lead to their own financial benefit. Prepare for curveball questions and be ready to steer the answers to areas in which your company consistently excels.

It’s tempting to only worry about the fires directly in front of you. After all, there’s little sense in planning for a lucrative acquisition down the line if your business doesn’t survive to see the day of the actual offer.

However, you can ensure that your company is well-positioned for acquisitions, and whatever else the future decides to throw at you, by diversifying your portfolio and maintaining meticulous records. Don’t let subpar practices stifle your future opportunities.

The post How to Build (and Prepare for) an Acquisition appeared first on Inc. and is written by Carol Sankar

Original source: Inc.

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