Your success as an entrepreneur might not just lie in your startup — it may be found in other companies. Once your startup finds its footing and your capital stabilizes, you may consider merging with or acquiring other companies to grow. It might be an exciting thought, but steady your hand. Put down the pen and ask yourself whether or not you’re actually ready to buy another company. Consider this before acquiring a company:
Does Your Startup Have a Strong Foundation?
There’s a lot of promise in absorbing another company to improve your startup, but it’s still an expense. Should the deal not give as much as you think, will your company be able to survive the acquisition? There is such a thing as expanding too quickly and ending up with a company that has too many expenses and not enough income.
Take a hard look at your company. Do you think your employees will stay through the merger or will you find yourself with more strangers than familiar faces? Think about your company culture — will it mesh with the other company’s culture or will you find yourself with a high turnover rate after you buy it? You’ll also want to see if you have the time, capital, and even energy to navigate your way to a profitable merger.
Will This Improve Your Startup’s Position?
Being objective oriented is part of being an entrepreneur, and your objective, when it comes to acquisitions, is growth and positioning. Will the acquisition improve your company in some manner or will it just become bigger? Think about whether or not the new company will give you access to other markets. Will it give you access to technology that would otherwise be prohibitively expensive to obtain?
Does the Acquisition Fit Your Company?
Two of the most important aspects of your company are its culture and its core values. These helped you steer the startup to where it is today, to a place where you can consider acquiring another company to expand its reach. The fact is that personalities and ideals matter and if the incoming executive team and their employees can’t mesh with yours, the merger might not be ideal.
Talk to the people selling the company, as well as any and all related key personnel. Get to know what they expect out of a good day’s work, as well as what benefits they expect and have received. These conversations will help you figure out whether your philosophies align or whether you should consider merging with another company.
Are There Key Employees on Either Side That Will be Lost after the Merger?
The success of a company can often be attributed to a few key employees. Of course, all your employees are important, but there are play makers who helped ensure that your startup made it to this point. The same goes for any company you’re going to acquire. With an acquisition, you run the risk of creating redundancies or a high turnover right that may make the company being acquired more trouble than it’s worth.
Talk to employees in your startup and in the company being acquired. Get a feel for whether or not they’re fond of the merger, or if they’re going to find employment elsewhere if things come together. Check with your managers and see if any redundancies will affect your key personnel and force you to choose between someone who’s been invaluable to your startup and someone who makes the other company run well.
Have You Thoroughly Reviewed the Other Company?
When you acquire or merge with a company, you take on everything relating to them. Their branding can color the way your company is perceived, and their monetary problems may cause your once-successful startup to flounder. Check the company’s portfolio and see how they’ve been performing. Are their contracts all in order? Are there any liabilities or employment contracts that you should be aware of?
These are some of the key areas you must examine. As an entrepreneur, your startup is your first priority. Think realistically about how much the acquisition will help your company. Consider key personnel on both sides and whether or not they’re going to stay or become redundant. Do the two companies fit in terms of culture and philosophy? Examining these considerations will help you determine whether or not the time has come for a merger or acquisition. Should the answer be “no,” don’t worry. Other opportunities will come.
