Business valuations are on the downturn. An article by Forbes believes that the downward trend might continue for several years. However, low business valuations mean good opportunities for business owners looking for a deal.
Continue reading if you believe an acquisition might be the best option for your business. It takes careful planning to pull off a successful investment that positions your company for success.
Craft a mission statement
You cannot approach a prospect without knowing why you want to make the acquisition. Write a mission statement of what you believe a successful purchase entails. For instance, you might want to add their earnings to your own company’s revenue, or you might want to retain their employees and clientele.
Question undervalued companies
You still want to purchase a company at market value. The market may be down, but if a business wants to sell cheaply, you should be very suspicious of the reasons why. Good companies should come to the table with a realistic valuation.
Plan for integration early
An integration strategy should be a part of your acquisition strategy. Do not leave this for after the purchase. Start building your integration team before drafting an acquisition plan. Too many companies wait until it is too late, and the acquisition becomes a burden rather than an asset.
Create financial models
A financial model gives you an idea of the necessary debt for the purchase. Use a similar organization as a prototype and weigh the pros and cons of the investment. Go back and adjust your mission statement accordingly.
Acquiring a business is an exciting project. Look for good companies that do not sell themselves short, and build your strategy from there.