Further Questions To Ask Potential Acquisition Targets

By Tom Cobery
In March 3, 2015

As I mentioned in my last blog, I am going to address certain issues that need to be asked by an acquiring company of a potential acquisition target. I have answered these questions previously in an article written for The International Reprographic Association (IRgA) newsletter. Below are a few more questions:

  • “Tell me about your sales.” There are many aspects to this question. If you want to enter into a new market through an acquisition, then you may be interested in the company’s sales in that market rather than its overall quantity of sales. If, however, you are looking to fill excess production capacity at your company (which is called “tucking in” the acquisition), quantity of sales might be your focus.
  • “What about the quality of the Acquisition’s sales?” Although the sales quantity is important, you still have to ensure that the sales quality is strong as well. If you are going to “tuck in” the sales and the margins are not what you need to meet your operating profit expectation, you have a situation in which you have to make a difficult choice. If you raise prices, you stand a strong chance of losing that customer. If you do not raise prices, you run the risk of over-paying the seller for that customer.

It is imperative that you get a good understanding of the seller’s pricing and the quality of its major customers, i.e., the length of time doing business with them, the company contact, its payment history, etc.

  • “What about administrative costs?” Remember that the administrative costs of an acquisition, such as legal fees and due diligence costs, are very similar for a small acquisition as they are for a large acquisition.

These are just a few questions you might want to consider. More questions to consider will be addressed in the upcoming months. If you want to chat, give me a call at (201) 523-6326 or email me at tcobery@epicomm.org.

Tom Cobery

Dealing with the day-to-day needs of running a busy printing operation often leaves company leaders little time to plan for the future of their enterprises on their own. Tom works with chief executive officers and senior management executives in the Tag and Label Industry to develop growth opportunities through strategic transactions, new markets, or new service opportunities. Available for consulting on individual projects, he can also be engaged to serve as an Advisory Partner, helping executives guide their company into the future, serving as an impartial sounding board for ideas, and working with them to set the right course for continued growth and greater profitability. Tom’s personal experience as a Tag and Label Industry company president and chief executive officer, plus his extensive networking with other industry executives through his volunteer leadership activities with the Tag and Label Manufacturers Institute (TLMI) give him a unique perspective on the tough issues today’s company leaders face in this specialized segment. Companies engaging Tom will find his insight and independent advice an invaluable asset in helping them achieve their growth and profitability goals. More than a consultant, Tom Cobery wants to be your trusted Advisory Partner.

Leave A Comment