10 Things to Look For When Considering an Acquisition






A smart acquisition can give your small company the boost it needs to become big. However, just because you can acquire another company doesn’t mean you should. To learn how to know if it’s a good idea, we asked 10 small business owners the following:



“What should I look out for when sizing up and considering an acquisition for my small business or startup? Why?”

Here’s what YEC community members had to say:

1. How the Acquisition Extends Your Brand Message

“I like to think about my company and our acquisitions as many chapters in a detailed overarching narrative. Does it make sense to the customer and do our products and acquisitions flow from one chapter to the next? I hate it when other companies pick up acquisitions that seem to come out of left field. It makes me feel like they’re playing a game of Monopoly rather than running a business.” ~ Rob Fulton, Exponential Black

2. Whether the Numbers Match Up

“I’ve lost a lot of money on acquisitions in the past by not making sure that their books, sales and other systems match up. Have a firm go in and audit everything. Then audit it yourself. Any company that doesn’t allow you to take a look at everything and take the engine apart isn’t worth your time. If you’re really going to buy them, they should have no problem.” ~ John RamptonDue

3. A Strategic Non-Compete Provision

“If you are looking to acquire a competitor, pay particular attention not only to the duration and geographic scope of the non-compete restrictions, but also the definition of a “competing venture.” The last thing you want to do is to provide the jet fuel for your competitor’s next venture, particularly if that new venture will hurt the business you just acquired.” ~ Doug BendBend Law Group, PC

4. The Ongoing Cost of Running That Business

“When you acquire a business, it’s easy to focus only on how the company has performed, and where the upsides are. What’s probably more important is understanding the costs — not just money but also time — of keeping that business afloat. How will the acquisition affect your cash flow? Can you afford to retain all of the staff on the new company and if not, will the revenue you project still be there?” ~ Aaron SchwartzModify Watches

5. Their Company Culture Fit

“When you’re at the point where you can afford to buy another business, you should think about the employees you’re also buying. Do they have the same values as your current employees? Can you transfer your company’s culture to the new company? Is there going to be a lot of employee overlap between the new and old business?” ~ Kumar AroraAroridex, Ltd.

6. Legal Issues and Baggage

“Conduct thorough background checks into the company and any key personnel. Did the company or management face any lawsuits? How’s their reputation? How is their rapport with existing shareholders and investors? Are there internal conflicts and so forth? It’s easy to get blinded by all the wonderful things this acquisition will generate, but remember that nothing’s 100 percent perfect.” ~ Nicolas GremionFree-eBooks.net

7. Market Conditions and Competition

“Find out how many competitors your potential acquisition has and whether the market conditions are likely to be favorable in the short-term. While buying in a down market can get you a good price, make sure that whatever technology, patents, or know-how you’re acquiring is in a good niche with low competition. Otherwise you’ll only acquire a headache, not a competitive advantage.” ~ Dave NevogtHubstaff.com

8. Whether You’re Ready to Become an Employee

“When your startup is acquired, and if you stay on board, you’ll likely become an employee of the acquirer. Are you willing to go from entrepreneur to employee? As a startup, your investors are more like partners — you’re like knights of the roundtable. But acquisition means handing over your keys to the kingdom and hoping the knights will still answer the castle door when you knock.” ~ Jeff DenbyPACT Apparel

9. Aligned Company Values

“When considering acquisitions, our guiding principle has been evaluating whether a company and its management share our same “DNA.” Beyond whether the products, skills or talent they offer complement yours, knowing whether a potential acquisition matches your modus operandi as a company will make it easier to ascertain whether they will truly work to help you grow and develop as a company.” ~ Tomer Bar-Zeev, IronSource



10. Value Creation

“When you acquire a business, you will acquire it at fair market price. To make the acquisition successful, you need to receive better than fair market value in return. The way to do this is to identify new value that will be created by combining the company into your own. Can you expand existing accounts? Add new accounts? Eliminate competition? You must see a path to turn “zero” into “one” or better.” ~ Adam RoozenEchidna, Inc.

Acquisition Photo via Shutterstock 1 Comment ▼


The Young Entrepreneur Council


The Young Entrepreneur Council The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

One Reaction

  1. Aira Bongco

    It is tough but you have to ensure that there is more to added products and services in the acquisition. It must also be a fit in terms of culture and you have the money to sustain it. Great list.

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