BY MARK BORKOWSKI AND HUGH LATIF
When a company wants to speed up its growth, gain new resources and assets,
going it “solo” through organic growth may
work, but it definitely takes longer to achieve.
That’s when an acquisition can help. It’s like
building a new house versus buying an existing
one. Buying an existing house makes you the
owner overnight, compared to having to wait
until the new house is built.
Acquisitions are fundamentally a strategic tool.
While the reasons may be many, corporations
use acquisitions as a strategy to grow quickly
or defend against rapid changes in market
dynamics. In many instances, acquisitions
are an effective way to knock off an upcoming
threatening competitor, increase market share,
reduce financial risk, and diversify product or
When an acquisition goes bad, it usually
can be attributed to the strategy being wrong
to begin with, setting expectations too high,
Here are seven suggestions designed to
smooth the acquisition process:
1. Know the No. 1 reason you are making the
acquisition. Deals that have one or maximum
two specific reasons for acquisition are usually
more successful because there is a clear, precise
Acquiring a company for several reasons tends
to dilute the fundamental purpose of the acquisition and may also reduce focus. Down the line
you may uncover many secondary benefits, and
that’s OK; but keeping your focus on the main
value will more often give you what you want to
One example is a company that doesn’t have
a presence in a certain geographic area and
an acquisition will enable that to happen. A
singular reason leads to a simple, reasonable
2. Do your homework on timing. Wise and
successful investors buy when everybody is
selling and sell when everybody is buying.
However, this usually is easier said than done.
While you cannot get it perfect every time,
reviewing the macro-economic picture will
yield better results because asset valuation can
fluctuate with economic cycles.
3. Plan for the post-acquisition phase. You
should know in advance what you are going
to do after the acquisition. Do you intend to
treat the acquired company as a stand-alone
business, or are you going to absorb it into the
Many acquisitions go bad because the
acquirer had no plan of what to do once it made
the purchase. Conversely, those with well-thought-out plans have demonstrated success.
Walmart entered the Canadian market in 1994
with the acquisition of 122 Canadian Woolco
stores which, at the time was a troubled subsid-
iary of Woolworth Canada. Gradually Walmart
renovated the stores and converted them to the
Walmart banner. All employees were retained
and received a welcome raise by joining the
Walmart family, and a senior vice president of
Woolco became CEO. This kind of plan is like a
road map; it does not guarantee you get to your
destination, but it does show you the way there.
4. Look for culture compatibility. Company
7suggestions for successful acquisitions in the metalworking industry