Acquisition Planning Process: 6 Questions to Answer Right Now

Written By Dave Lavinsky
blue and silver question mark

I just finished reading through the 2011 M&A reports (the reports usually come out a month or two after the end of the year). It’s something I do each year. To see exactly which companies were acquired during the past year. To understand trends. And to understand precisely the kinds of smaller companies that bigger companies are buying.

Fortunately, with regards to the last factor, the characteristics of a sell-able company don’t change much. I’ll get back to that in a minute.

But for now, I’d like to hand out the award to the company that acquired the most companies in 2011 – Google.

Google made 25 acquisitions in 2011; buying companies including Clever Sense, RightsFlow, Apture, Katango, SocialGrapple and more. In doing so, Google made the 25 founders of those companies VERY wealthy.

And rightfully so; any entrepreneur who starts, builds and sells a successful company SHOULD be paid handsomely.

But Google’s acquisitions weren’t even a blip on the entire radar screen of acquisitions. According to research firm Berkery Noyes, in the “information industry” alone, there were 3,098 acquisitions last year (up 17% vs. 2010).

And in the Online & Mobile market, there were 161 acquisitions (up 39%). In the Software Industry there were 1,450 acquisitions (up 10%).

In the Media & Marketing Industry there were 1,435 acquisitions (up 17%). In the Financial Technology and Information Industry there were 1,450 acquisitions (up 10%). In the Education Industry there were 229 acquisitions (up 10%).

And transaction volumes were up in the healthcare and many other industries too.

I tell you this, because even though you may be years away from selling your company to a larger company, you need to start thinking and planning for your exit NOW.

Why? As Yogi Berra once said, “if you don’t know where you’re going, you’re probably not going to get there.”

Building a sellable business takes time. You need the right systems. The right products. The right customers. Etc. And building these things doesn’t happen overnight.

And it’s not just the result of having a good product or service that customers want.

Rather, you need to plan for it. You need to identify the skill sets to acquire and get them. You need to build a complete business from the ground up.

While it’s impossible for me to tell you how to do all this in just one essay, or even 100 essays, I can give you an exercise that will really help you. And get you started on the right foot.

This exercise is for you to imagine what your business will look like on the day you sell your company to a larger entity.

1. What will be the date of that acquisition?

2. What will your revenues be on that date?

3. How many and what type of customers will you be serving?

4. Who will your key employees be and what roles will they perform?

5. Who will your key partners/joint ventures be with?

6. How many locations will your business have?

After you answer these questions, you need to start reverse engineering this vision. For example, how will you acquire the customers you will eventually have when you exit?

You need to start figuring this out, and planning this now. Since all great things take time and planning to achieve. Don’t wait. At a minimum complete the exercise and write down your answers right now. And then tomorrow you can start building your action plan.

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