four common problems with acquisitions
TRANSCRIPT
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4 common problems with ACQUISITIONS
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Excerpts from Mistakes Millionaires Make, by Harry Clark
Take the Entrepreneurial Risk Assessment at: www.pathwaypartnersllc.com
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My name is Harry Clark and I thought I had it made.
By 2004, I had:
founded two INC. 500 companies
450 employees
a $100 million net worth
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BUT I LOST
EVERYTHING
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NO
RESOURCES
I realized that there were
to help entrepreneurs avoid
common mistakes
once they made it
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ENTREPENEURS
That lead me to interview
30
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CRASHED
that
spectacularly
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CLIMBED
and
back
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SHARE
I want to
what I discovered
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Several entrepreneurs interviewed
lost tens of millions of $ in wealth
due to
PROBLEMATIC
ACQUISITIONS
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In my 30 years as CEO,
I have made 6 acquisitions
and maybe half
performed well.
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These are 4 key issues to consider
ACQUISITION
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BEFORE making an
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#1
UNDERPERFORM
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Super majority of acquisitions
expectations
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Based on acquisitions related research and
conversations with CEOs with significant
acquisition experience, about
80% of acquisitions underperform
the expectations of
the acquiring company
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Even if there is a base case, worst case
and best case scenario developed,
it is hardly unusual for
acquisitions to perform at a
LOWER level than the worst case projection.
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#2
DRILL
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DEEP
Spend more time on
Due Diligence and
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spent on
One common cause for
poor acquisitions is
the due diligence
time and effort
INSUFFICIENT
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One CEO interviewed
due to his due diligence team
not confirming the details
of the fourth largest client
of the company he
LOST
just acquired.
EVERYTHING
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The seller of the company
the prices to its fourth largest
customer, giving short-term profits
(to support a higher company sales price)
only to have that customer leave
JACKED
after the sale of the company!
UP
ONE MONTH
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#3 DON’T BE OPTIMISTIC
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It’s encouraged for an entrepreneur to be optimistic,
but not in an acquisition.
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It’s better to be
REALISTIC
PESSIMISTIC
or
about the assumptions
and synergy value of
the transaction
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Optimistic projections will never
come to fruition
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#4
OVER
DON’T
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LEVERAGE
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Over leveraging debt
to lower the cash
investment
needed up-front
JUST
DOESN’T
WORK
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There were several examples
where the use of
only to lose everything as a result
MEZZANINE
allowed companies to make acquisitions
DEBT
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of the corporate finance world
LOAN
Mezzanine lenders are like the
SHARKS
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to make a deal happen, then it’s better to
WALK
from it
If you need mezzanine financing
AWAY
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Learn more by reading my up-coming book
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Or by taking the
Entrepreneurial Risk Assessment Survey at
http://pathwaypartnersllc.com/
Or by subscribing
And remember: to my blog
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