“I create nothing. I own.” – Gordon Gekko, as played by Michael Douglas in the movie “Wall Street.”
Business acquisitions are announced in the Wall Street Journal almost everyday and are glamourized in movies such as Oliver Stone’s “Wall Street.” But most small business are not public. So most owners only have imagined what an acquisition process entails — or they just have cliched Gordon Gekko quotes to go on.
Successful Acquisitions: A Proven Plan for Strategic Growth by David Braun and published by AMACOM, looks to provide value details. I learned about the book through a Twitter connection, and requested a review copy.
Braun is a mergers and acquisitions expert with more than one billion dollars in transactions. He is the founder and CEO of Capstone Strategic, Inc.
His experience certainly informed the book’s topic in a lively manner. Not only does he know his subject matter inside and out, but he can communicate it in a way for business owners to understand. He explains the nuances well enough for the reader to learn why certain steps are necessary. This quote in the opening pages declares the value of review against a business growth decision:
“Because growth, especially external growth, turns our attention to opportunities in the world beyond our own operation, it’s easy to rush into action without an adequate review of where we are coming from.”
That experience plays well in explaining the possible perspectives from business leaders at the acquisition end of a bid. Braun explains the art of the “no” in a due diligence effort:
“I have rarely found an owner who, when asked if he would consider selling his business, immediately says, “Yes, I want to sell, and I want to sell now.” If you did actually get an immediate yes, this might well indicate weakness on the part of the prospect…. You should embrace every rejection because if you listen carefully to the reasons, they can lead you to the hidden equation for which the owner will, in fact, sell.”
The book is divided into three main sections:
- Building a Foundation – discusses how you evaluate the merger concept.
- Building Relationships with People – helps you understand the right overtures that lead to negotiating with mutual respect.
- Building an Actual Deal – addresses the nuts and bolts of finance and legal details, such as what a letter of intent should provide.
Braun writes about the top 10 most common reasons to acquire a business. His perspective on business acquisitions is certainly seasoned, providing a 360-degree view of the merits of acquiring other companies. Take this reason:
“Stabilizing financials – Buying and incorporating a business with higher margins can bring stability to your balance sheet. When your business is impacted by cyclicality and seasonality, and a cash cow dies, the right acquisition lets you invest in a new breed.”
The third section, building an actual deal, includes some finance concepts such as weighted average cost of capital. I remember this formula from my finance courses in my MBA studies. Braun makes its value, as well as other terminology, plain to those who skipped business courses. You don’t need an MBA to understand it. Moreover, he mainly focuses on the kind of the soft skills that can make or break so many mergers and acquisitions — more so than a finance model could or would.
If you have B2B sales or lead generation experience, the research advice will dovetail nicely into what you already know. You’ll know what Braun means when he writes that:
“Your success at this stage is contingent on your faith in the principle that every company is for sale for the right equation.”
But Braun stays above “Boiler Room” recommendations. He remains grounded to the big picture that real businesses face in an acquisition.
With one read of his book, your chances to be equally grounded – and successful — in either doing successful acquisitions of other businesses or having your business be acquired, will increase.
If you have been presented with third-party offers to buy your business, or you’re considering acquiring another business, read this book. It is not a do-it-yourself manual designed to qualify you to handle acquisitions on your own without skilled help. But you will gain important background information and context. The more you know, the more you maximize your chances for successful acquisitions.
Interesting. I guess it has something to do with the human ego. We are so quick to let ourselves expand when the opportunity arises. This book is a great teacher when it comes to the psychological part of business.
Thanks for the review. I found the book easy to follow and the anecdotes based on Braun’s experience particularly helpful for understanding the strategic concepts. A good read if you’re planning an acquisition or simply want to learn more about M&A.