As the economy continues to progress, and capital remains readily available for many people, it might make sense to consider a merger or an acquisition as part of your growth strategy. While this thought might provoke excitement, you need to consider a number of factors before you find yourself signing on the dotted line. I recently came across an article in entrepreneur.com that posted five questions to keep in mind while contemplating an acquisition.

1. What to Ask While
Acquiring a Business
by Adam Kidan

2. As the economy continues to progress, and capital remains readily
available for many people, it might make sense to consider a
merger or an acquisition as part of your growth strategy. While this
thought might provoke excitement, you need to consider a number
of factors before you find yourself signing on the dotted line. I
recently came across an article in entrepreneur.com that posted
five questions to keep in mind while contemplating an acquisition.
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3. 1. Is there a solid
foundation?
Many companies get caught up in the idea of a merger or acquisition because of the promise it entails, but then they
end up failing within a few years due to moving too quickly or a lack of infrastructure. If a deal ends up under-
performing, or the industry falls out of favor, the business might not be able to have the resources and staying power to
stay afloat. To gauge the readiness of your company for a transaction, look inward and perform internal stress tests.
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One major challenge facing the current financial services industry is the aging workforce. According to a Financial
Advisor magazine, around 43 percent of financial advisors are over the age of 55, and there isn’t yet a steady crop of
younger advisors who can adequately replace the more experienced, soon-to-retire advisors. This experience gap
could lead to hastily-executed mergers, meaning that financial advisory firms could lose clients due to their up-and-
coming advisors being unable to maintain the same level of service and advice.

4. 2. Is it a good fit for your
company?
Chemistry with the executive team and staff is a crucial step to the completion of a successful deal.
Taking a “holistic” approach when it comes to studying the company will have both short-term and long-
term benefits, and such an approach generally requires extensive communication and face-to-face
meetings with both the seller and key personnel. These conversations can help a buyer more effectively
understand the prospective company’s culture, confirm a philosophical alignment and ultimately make for
a smoother transition. Often-times, acquirers focus too much on the mathematics of an acquisition and
not enough on the people and culture.
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5. 3. Are there key employees responsible
for major contributions to the company’s
success after acquisition?
Employee turnover causes the loss of approximately $11 billion every year, and 75 percent of
people who quit their jobs cite their bosses as a reason. Therefore, gaining the trust of
existing staff goes a long way toward helping you reduce the risk of losing key people. This
is why you need to be both clear and intentional about your commitment to key employees,
and recognize their contributions. This should ideally take place early on in the process and
well before the transaction is completed. Transparency is essential, and you should be
willing to work work with these key personnel on various issues, since they’ll be invaluable
during both the transition phase and the upcoming future growth phase.
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6. 4. What level of due diligence
should you perform?
To verify its stand-alone value and reveal any red flags that could become problematic in the
future, review your company’s portfolio and performance history. When evaluating the
numbers, make sure you figure out what it will take to achieve economies of scale, and then
identify where the elimination of redundancies will add to your bottom line. Some common
items to investigate include current assets and liabilities, employment contracts, vendor
contracts, bonus benefit and equity arrangements, equipment leases and credit reports.
Some additional items for consideration should include compliance records and
demographics surrounding the business that could affect the acquisition’s viability.

7. 5. Will the acquisition better position
your business for the future?
Creating inorganic growth and helping secure a competitive advantage are the key
objectives of any acquisition. Benefits associated with scale and efficiency could also help
to increase margin. Some of these include whether or not the transaction will create access
to new markets, if this acquisition offers access to new technology or new lines of business,
and whether or not your company will gain intellectual capital to advance their enterprise.
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