In the next few months I am going to look at certain issues that an acquiring company needs to address when considering a potential acquisition target.
The first request to make of the target company is, “Tell me about your market.” From the outset, you want to know whether your potential acquisition target has something you want, such as an existing customer base separate from your own, technical capabilities you don’t have, or enough business to increase your economies of scale.
Sometimes it’s more economical to acquire a company in a business area you want to get into than to try to get into that area yourself, especially if your target company has the trained people, technology, and customers already in place.
One way to determine how well an acquisition target is really doing in its market is to survey its existing customer base. Don’t just pick up the phone and start calling people. The targeted company would not appreciate that approach. Instead, consider having the acquisition target do a formal survey of its customer base.
This is just a starting point. More issues to address and questions to consider will be discussed in the coming months. Meanwhile, if you want to chat, give me a call at (201) 523-6326 or email me at tcobery@epicomm.org.