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Buying a business: the do's and don'ts

This is how NOT to buy a business...

  • Have a strategic grand design and make it a ‘must’ - by definition that excludes all other possibilities.
  • Never review the strategy - and don’t promptly modify or scrap plans if events contradict them.
  • Make sure that the strategic buy plays not to your strengths, but to your weaknesses.
  • Increase the initial risk exposure by unplanned pre- and post-acquisition initiatives - like raising the price.
  • Take external and internal approvals of the strategic stroke as confirming its rightness - and always ignore Cassandras, internal or external.
  • Don’t let anybody lower down criticise the strategy or the buy, and over-commit top management to the deal
  • Apply the buyer’s accepted rules and routines - without their being checked for relevance.
  • Discourage messengers from bringing bad news - and ensure that corrective reaction to bad news is dangerously delayed.
  • Do not admit failure: rather, deny it.

This is how ace buyers purchase a business...

  • There’s no grand design; the deal is strictly opportunistic, and disposals of unwanted bits are briskly made.
  • The business strategy is highly flexible, and, after disposals, largely left to operating management.
  • The purchaser is only interested in the buy’s strengths, and acts swiftly to eradicate weaknesses and weak operations.
  • Post-acquisition management follows a model developed from experience, designed to narrow the already small risks.
  • The acquirer is only interested in external and internal approval to the extent that approval helps or hinders the capture of the target.
  • Top management is committed only to the economic success of the deal.
  • The rules and routines applied to the new situation have worked in many takeovers and situations.
  • Bad news produces immediate and effective correction.
  • Failure is not excused; the acquisition has to meet the purchaser’s simple, clear and comprehensive purpose: to make money.

Robert Heller