| There are no "rules of thumb" in the pursuit of | | | | will prevail |
| companies to | | | | because it is unrealistic to think you will find the exact, |
| buy. Each purchase opportunity has to stand on its | | | | "perfect" acquisition opportunity. There are, however, |
| own merits. | | | | business attributes, like these listed below, that are |
| There are, however, attributes of acquisition | | | | best |
| candidates that | | | | left with the current company owners: |
| need to be defined for what they really are before | | | | The sellers have previously terminated two or more |
| additional, | | | | purchase contracts |
| limited resources are put at risk in a potential deal. It is | | | | The current business owners have no clear, |
| absolutely critical for any proactive business buyer to | | | | compelling reason to sell |
| understand, consider and deal with specific business | | | | The sellers cannot provide basic financial information |
| characteristics that add unnecessary financial risk to | | | | The business is completely dependent on one key |
| the | | | | employee |
| investment opportunity at hand.The purpose of this | | | | The seller will not provide any form of "earn-out" |
| article is to highlight characteristics of | | | | based on future company performance |
| acquisition candidates that you should consider | | | | The business relies on limited natural resources to |
| absolute "deal | | | | produce its product or service |
| killers". These are brought to your attention because it | | | | Improper application of the company's product/ |
| is | | | | service = major $ liability |
| very common and natural to get so far down the due | | | | The company has not been profitable for the last 3 |
| diligence | | | | years |
| trail on a company you have worked so hard to find, | | | | Pending significant legislation possibly impairs future |
| that IS | | | | growth |
| for sale, that is right in your industry "comfort zone" | | | | Key personnel will not sign employment contracts or |
| and | | | | non-compete's |
| not see the inevitable financial disaster looming down | | | | Payment on acquisition debt exceeds 50% of |
| the | | | | after-tax profits |
| road because you became "blind" to what the future | | | | There is an insufficient pool of labor or talent to grow |
| business | | | | the business |
| potential will be, versus the potential of what you think | | | | There is no technical or knowledge barrier to entry for |
| it | | | | the targeted business niche |
| could be!Buying Quality Businesses is a "Number's | | | | Key patents are about to expire |
| Game"There is a direct relationship between | | | | Only one supplier can provide a key product/ service |
| perceived value of | | | | ingredient |
| something that is in very limited supply and the time | | | | One customer equals greater than 20% of total |
| and | | | | annual sales revenues |
| effort you have invested to find it. Quality businesses, | | | | A viable competitor offers ALL the products and |
| with | | | | services your customers need |
| extraordinary growth potential, that are for sale, are | | | | There is no customer purchase loyalty |
| like | | | | The overall demographics of your targeted market(s) |
| the proverbial "Diamond in the rough" or "Needle in the | | | | are negative |
| haystack" analogies ... it takes removal of tons of dirt | | | | Extraordinary product/ service warranties are firmly |
| and | | | | established within the industry |
| mounds of hay to find what you seek!In any proactive | | | | The product must be manufactured overseas to |
| business acquisition pursuit, a seasoned | | | | effectively compete |
| business buyer will tell you that finding viable | | | | Targeted, primary markets have had no growth the |
| companies | | | | last three years |
| that can be purchased for reasonable terms is a | | | | There is existing or pending, noteworthy legal |
| "number's | | | | encumbrances against the company |
| game". Thousands of company candidates, that lead | | | | You determine the current business owner lies to you |
| to hundreds | | | | about "small" details |
| of contacts, which lead to ten's of acquisition | | | | Assuming you have clearly defined and documented |
| conversations, | | | | your critical |
| that hopefully lead to one company purchase!Going | | | | Business purchase criteria well in advance to starting |
| into any business acquisition effort, knowing what it | | | | your |
| takes to find and eventually secure a business | | | | business acquisition program, you will often start to |
| purchase deal | | | | compromise your purchase criteria as you continue to |
| has a dramatic affect on the definition and your | | | | invest |
| eventual | | | | more time and money to find your "ideal" acquisition |
| allegiance to your business purchase criteria. If your | | | | candidate. This is a "cardinal sin" in merger and |
| purchase criteria are too "tight" and your commitment | | | | acquisition |
| too | | | | pursuits. Compromising your purchase criteria is natural |
| rigid to that criteria, you may quickly feel you'll never | | | | tendency, but ultimately a fatal mistake!The |
| find | | | | importance of defining, understanding and truly |
| your "ideal" company to buy!Absolutely, | | | | committing |
| Unquestionably, No Brainer, "Deal Killers"Attempting to | | | | to your critical company attributes is most important |
| find and qualify businesses to buy is an | | | | during |
| iterative and complex process. Each opportunity | | | | these frustrating times. The most effective business |
| eventually | | | | buyers |
| stands on its own merits and purchase compromises | | | | are disciplined business buyers. |