Page 8 - The Alp McNamara Downturn Survival Kit

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9. Acquire that struggling business?
You may have never contemplated it before, but a significant business downturn can represent a great opportunity to acquire (all or part of) a competitor’s business.
That incremental revenue might represent a decade of sales growth. But of course, only worthwhile if you are selective and targeted.
The value of any business is largely based on a multiple of its earnings. When a business is making losses, it may have little or no value. Indeed, it may be something to avoid at all costs.
However, if it could be possible to acquire just those valuable parts of the business that can be added to your business without the downside of additional overhead, then an acquisition might be very worthwhile.
In most cases, you are unlikely to want all of it. You will not want any of the baggage (old cost structure) but might want to ‘cherry pick’ only those parts (sales, best people, brand, customer loyalty) that can add value to your own business and build your competitive advantages.
Clearly, this is not an action undertaken on a whim but rather through a considered strategy that looks at:
• Thebenefitsthatmightarisefromsuchanacquisition.
• Thecostsandrisksassociatedwithalackoffocusonyourexisting business, a possible failure to integrate or, an inaccurate assessment of the benefits or costs.
• Theportabilityofthepiecesyouwanttoacquire(brands,people,sites, products, suppliers, IP and of course, customers).
• Thefinancial,humanandopportunitycostofthedistractionofan acquisition. Squeaky wheels get the oil.
• Thetypeoftargetthatmightbesuitableandalistofthose organisations which fit that profile.
• Themethodologynecessarytomakeitknownthatyouareinterested in acquisition and the process necessary to acquire.
A good adviser can help a business owner understand the costs, benefits and strategy involved in an acquisition. We have seen this type of strategy bring significant upside.
When an owner has a considered acquisition strategy, they quietly keep their eyes open and make it known to targets that they might one day be interested. That moment often comes as a surprise.
That opportunity may have otherwise passed them by.