Don’t Make an Acquisition Until You Read This.


These are anxious and uncertain times for every entrepreneur. Coming out of the long, COVID-19-enforced and unhappy limbo, entrepreneurs with their built-in bias toward action, and caught in the intoxicating euphoria of sheer survival, are now especially at risk of intemperate efforts to jump back into the game quickly. Much too quickly. There’s a growing pressure to relieve all that accumulated anxiety and to release and redirect all that pent-up energy by doing something, even if it’s just to keep busy. It’s the triumph of busy-ness over business and that’s a certain prescription for pain and unforced errors.

I’ve seen this cyclical mindset several times as the economy has emerged from especially tough times. It manifests itself in different ways, but the area where the most costly mistakes are made is one where high hopes and wishful thinking, the best of intentions, and a sincere desire to help fellow entrepreneurs out of the ditch combine to justify mergers, fold-ins, and acquisitions of struggling entities that would never withstand even reasonable scrutiny under more normal circumstances. I appreciate that charity and kindness are true virtues, and that such deals can make us feel good even when they’re premised on shaky beliefs about synergy and a deluded and intentional avoidance of some hard realities. But you need to resist them.

In the real world, businesses fail for a reason. And while there may even be noble failures, it’s generally not a good idea, or your obligation, to try to rescue them from the consequences of their own choices and mistakes or attempt to prolong their lives until some other savior happens along. And frankly, the same warning goes for  most of the people involved

Whatever you may think as you gaze from the outside, once you “own” the business you’ve bought (regardless of the price), you end up with a parade of problems that you don’t need, don’t have time to deal with, can’t afford and shouldn’t have taken on in the first place. These include too many people doing too little, people with fake and inflated titles who are living examples of the Peter Principle, and people who are angry and unhappy through no fault of yours. Add to that all manner of petty politics, inherited and antiquated programs and systems, and software that no one had the guts or good sense to kill before the company hit the skids.

Let me tell you from a wealth of experience and close-up observation that when you look back on one of these messes, you’ll quickly come to understand that the only thing worse than going it alone in these tough times is wishing that you were. Misery may love company and you may think that you’re doing a good deed and at the same time adding critical mass to your team and your business, but too many times all you’re doing is inheriting problems, diluting your focus and attention and precluding yourself from pursuing other real opportunities. In these cases, just say “No”.

Here are four easy rules to help you through these trying times and get you safely to the other side.

(1)   Always partner up, not down.  

If there aren’t clear, obvious and immediate reasons and benefits that aid, advance, and accelerate your current business, walk away. Right now’s not really the time to talk yourself into taking on new adventures, additional lines of business, or anything else that takes time, attention and resources away from rebuilding the core.  Remember that assets are always debatable, but costs and liabilities are 100% dead weight from Day One. And, in terms of people, remember that A players hire other A’s, while B players hire C’s. Don’t settle for second best even if it seems like a bargain.

 (2)   Build on your strengths and prospects; don’t do a deal to try to shore up your weaknesses.

There are no quick fixes or miracle cures for basic deficiencies in your business. You need to face them and fix them. Many entrepreneurs found themselves looking directly into the abyss over the last two years and it’s comforting to think you can fold in some additional folks who’ve also been there, so you won’t feel so alone, and they’ll be grateful (at least for a little while) to boot. You want to always be driven by fortune and not fear. But the fundamental failings in the base business won’t get better by themselves and adding more bodies along with the complexities and confusion always inherent in integrating any new operation into your ongoing business (which is undoubtedly undergoing some radical changes of its own) is a really bad bet. It’s just a variation of Brook’s Law which states that adding more manpower to an already late software project simply makes it later.

 (3)   It’s not what you pay for something, it’s what it ends up costing you.

Even free isn’t much of a deal if it comes with a bunch of hair and hidden costs like crappy code and other problems. By definition, any implementation is going to take at least twice as long as you expected and cost a great deal more in time and dollars than you projected. But even apart from any “tech debt,” which requires reworking, rewriting and often replacement, the other costs and complications around products, personnel and politics are another serious time sink and distraction. When the inbound folks start to realize that the grass isn’t that much greener and they have new bosses, less autonomy and fewer resources, the sellers’ remorse, pity parties and general ennui can weigh down your whole operation.

(4)   Two lukewarm cups of coffee don’t make a hot drink.

The truth may well be that your own business isn’t such a shining light itself. You may just be in an incrementally better position to act in the moment. When all the activity and promotion around the transaction lessens, everyone on both sides may sadly discover that 2 + 2 equals 3 rather than 5. This isn’t likely to be good news for anyone and especially for the people paying the bills for the lawyers and accountants who were happy to put the deal together. This is just another reason to take some time, take a very careful look around, and then – if you decide to leap – make sure that you’ve done everything you can to manage and moderate the expectations of all concerned.

Always remember that if they were swans, they probably wouldn’t be for sale. Which means they’re much more likely to be ugly ducklings.

The opinions expressed here by columnists are their own, not those of

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An open minded personality.. fun to be with, because of my positive vibes. God fearing, for without God I am nothing.. Moved with compassion when dealing with you, not selfish or self-centered...

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