There may come a time in the management of your business where the buyout, or acquisition of another business's division or another business, becomes a viable option for growth. For instance, you may wish to take control of a key aspect of your supply chain or increase the breadth of your offerings. To determine the steps in identifying and negotiating a business buyout, we spoke to Gary Kubera, former CEO of Canexus.
Identify the Possibilities
First, what do you want to do and why do you want to do it? Is this for consolidation, extension (building out of selected business units), adjacency (adding new or different things) or diversification? With the answer, develop your list of criteria, which may include how the target business is structured, margins, internal skills, current performance and more. Refine your criteria as you go along.
Determine Interest (or Lack Thereof)
Once there is a target, is there is a potential deal? If published, what are they asking for, and how does that match up against your expectations and projections of future contribution? I'd take a step back and do three things. First, I'd make a list of what I'd want in the agreement to sell (e.g., the sale includes the intellectual property); and how I'd like it structured (e.g., immediate payment vs time payments vs payments based on performance metrics). Then, I'd learn more about the targeted company, not just the financials, but the nature of the company, what do they value to begin to understand how they may negotiate. Last, put together your pitch -- why this makes sense for both parties -- and your initial offer.
Striking a Deal
You may wish to negotiate this directly or through an intermediary such as a lawyer, broker or investment banker. Even if there is an obvious benefit to both parties and your offer is fair, there is always some back and forth. Sections 1 and 2 should have highlighted the potential middle ground. The most important advice I can give is to know when to fold your hand and walk away. The end result of this negotiation must be palatable to your business and pave the way for growth. You must have the discipline to walk away.
While not part of negotiation, this is the most overlooked part of acquisition and accounts for the majority of failures. You must have a plan with specific goals that focuses on customers, employees and systems.
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