What You Know Can Hurt You

Dealmakers often have to remind their buy-side clients not to fall deeply in love with a particular target when they hit the acquisition trail. Smitten buyers tend to be blinded to a target’s warts and risks and may end up either paying too much or waking up post-closing to serious problems that can’t be solved. The buyer, in fact, may be using its ardor as an excuse to take the easy way out and avoid doing the right homework. I was reminded of this tendency to play at m&a rather than work it in the most recent edition of Business Builder, the informative little newsletter published by Virtual Strategies, a Washington-based firm headed by the very able m&a intermediary David Braun. A recent feature answers a question coming from a business executive: His company is looking over a competitor and wants to know how to tell whether it’s the right company to buy. The simple two-pronged answer is: One, don’t limit yourself to a single target and, two, develop a sensible wish list that can be to applied to a larger field of potential acquisition candidates. Acquirers, the commentary continues, often limit their search to targets they are familiar with when they could be considering “a larger pool of potentially better fit companies.” Specific criteria should level the field by surfacing the best fits. Following this process will keep emotions in check. “Team agreement on these factors helps reduce the level of emotion when reviewing individual players and gets you focused on common criteria.” Good advice to new buyers and a wake-up call to experienced players. Martin Sikora Editor Copyright 2004 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com