When to say “No”

Dec 7, 2011 by Karen Anderson

As an organisation starts to investigate mergers and acquisitions as part of its growth strategy, opportunities seem to pop up everywhere. Over time and with shared insights from professionals who do deals all the time, we have started to identify some criteria for saying “No”.

The opportunity does not meet your organisation’s strategic aims

Business acquisition, partnership working and start-ups all need to be considered within the context of what your organisation is seeking to achieve. And within the context of your plans:

• Do they increase your income generation?
• Do they achieve extra social impact?

Consolidation and diversification are both valuable growth aims, ones that acquisition can meet. Often we are asked for a list of available businesses for sale, this is not a helpful place to start. We prefer to start with what organisations  are seeking to achieve through acquisition and create some target criteria. We can then look within the relevant area and ask our network of advisers if they know of a business that has these key characteristics.

This is a flexible process, however if an opportunity just does not meet your aims then saying “No” could save everyone a lot of time and money.

The deal will cost more than it delivers

There are many costs in the acquisition process:

• valuation and surveying
• business planning, feasibility studies and market research
• due diligence
• completion costs
• purchase price
• post acquisition investment.

Not all acquisitions have all these costs, some even have no purchase price. When reviewing the cost of the deal against the value created then it is important to consider all of them. And do not forget the many hours that this transaction will take from running your organisation. This is also a cost which may not even be quantified but should be factored into consideration.

Some deals may bring increase social benefit and just break even, some may generate greater income than social impact. Once again the criteria for evaluating the value of the deal to you as a purchaser should be linked to your organisational aims.

When all benefits and costs have been evaluated it would be considered wise to say “No” to a deal which costs you more than it delivers.

These are just two of the reasons we have seen for organisations to say “No” to potential deals.

 

DISCLAIMER
The views and opinions expressed in the blogs are independent and do not constitute endorsed advice or necessarily reflect the views or position of Social Firms Scotland or the Acquiring Business for Good Programme.