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The Key Question When Targeting Acquisitions: ‘What If?’

Asking "What if?" can bring clarity to M&A decisions that can be challenging with conflicting objectives.

acquisitionsLast year I found myself in an enviable position. The company I founded 10 years ago was doing well, at the top of its market, and after taking on growth equity funding for the first time, we were evaluating the market for acquisitions. With the guidance of our investors, in fairly rapid succession, we acquired four companies. I learned through these four transactions, after all the research and consultation with experts, and after seeing on paper the target looks good, there’s one last question to ask: What if? What if we don’t make the acquisition? What if we do? How will it change us as a company? These questions work no matter the reason for the acquisition. It brings clarity to a decision that can be challenging with conflicting objectives. Here’s how these What if? questions played out for us.

For one acquisition, we wanted to expand our market reach by buying our biggest competitor. I had gone through all the due diligence and evaluation criteria. As I reviewed my list of pros and cons, one of our investors gave me this framing question: What if someone else buys it? It reshaped the whole decision making process for me. I went right to that place in the future and envisioned our most important partner had acquired this company. For me the “what if” was obvious. If we did not acquire the company, a competitor or an important existing partner could. In a true entrepreneurial sense, at that moment, this was absolutely the most important message to consider.

“These questions work no matter the reason for the acquisition.”

I thought about the other market players out there and what would happen if our biggest rival acquired them. I didn’t like what I imagined. It meant our main competitor would be in the position to expand, take on new markets and compete with greater resources. I concluded we would not only move to make the acquisition, but also sweeten the deal. It worked. When the deal closed, it turned out our potential “What if” wasn’t far off from reality.  Another company had been trying to acquire several companies at once. We had made the right decision.

With another acquisition target, we wanted to take on an entirely new market and expand our total addressable market. This time, I asked, “What if we do this? How will it change us? Will we be able to provide the same level of customer service and product quality?” When we were able to confidently answer “yes” to this question, we moved forward with the acquisition.

The “What if?” framing also helped us avoid mistakes. One company we looked at was a fast-growing company with a complementary project and a lot of marquee clients. The numbers looked good, too. They had great bookings for the previous year and a gain in sales over the same period. But we suspected the numbers might be coming from one-time projects rather than long-term client commitments. Since retention is so important for us, and we did not have insight into the customer churn, we had to ask, “What if we had to rebuild their customer base from scratch next year?” With that possibility hanging in the air, we decided not to pursue them.

The ultimate “What if?” do-or-don’t question can expand your thinking and help you make final decisions in many acquisition scenarios. While it doesn’t replace all the upfront work you need to do, it can provide the laser focus you need to cut through indecision and make the right choice.


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