Successful Acquisitions, A Proven Plan for Strategic Growth, by David Braun, Amacom, 2013

Do you know what makes a company attractive to the venture capital mergers and acquisitions restructuring guys?  Sure, they’re looking for an assured profit, but they know it’s a little better than buying a lottery ticket – the risk and rewards are high.  Estimates for failures of start-ups relying on injections of VC money from  50% to two out of three.  And the complexities involved in any corporate transformation – legal and operating are huge, complex and lengthy.

What if we could look at successful acquisitions and mergers as a prime indicator of performance metrics, a way to look through the mirror at what makes your company a winner or a potential winner?  What would that tell us about what we can really focus performance goals on?  Wouldn’t that kind of examination eliminate a lot of extraneous number-crunching and philosophy talky-talk?

To start, David Braun offers a good list of the key metrics that real VC guys – because he is one, a real VC guy, CEO of Capstone Strategic – use to hunt and uncover hidden treasure.   The section on Due Diligence is a great source of perspective and key measurement areas  that highlight go-ahead (green), risk (yellow) and no-go areas (red).  For manufacturing, basic due diligence will test these areas:

Products/operations:  Current & expected capacity, High skill levels, Obsolete equipment, Certifications required, state of manufacturing, critical employees and institutional knowledge, preventative maintenance and replacement policy, quality program. 

Braun warns that the “official” line – org charts, job descriptions, process flows, etc., may very well not be what actually happens.  For example, the author recommends that potential acquisition leaders request organization charts.  “Have each of your functional area leaders ask her counterpart on the seller’s side draw the organizational chart for the whole company.  How the seller’s executives perceive the structure of the company can tell you how the chain of command works in reality.  I like to do this in a casual environment, away, from the office, so that the executives cannot simply hand over the printed corporate chart.” 

Here’s another recommendation that manufacturing supply chain pros will recognize:

“Map out the work flow process from sales to invoice.  Again, there may be varying perceptions of what really happens, and you can compare these viewpoints with the picture you got from the CEO to ensure that everyone is on the same page.” 

Further, background checks!  Braun advises companies to perform background checks, including credit checks on key individuals – in one example, Braun cites a controller who had filed for bankruptcy – twice!  Because this was not the type of individual the deal-maker wanted running the books, his release was part of the final acquisition agreement!

The financial due diligence process is equally complex and revealing.  Take a look at Figure 12 – 2 for the condensed version.  Included in this table are five categories of investigation – asset documentation,  liabilities and equity, invisible risks, revenues, expenses -   including pension liabilities and intellectual property values.

For professionals in companies in the process of being acquired or merged, or for companies struggling to stay afloat, this book could be a life saver.  In this era of cheap cheap money, with some companies carrying incredible stashes of cash at home and abroad, even manufacturing and supply management pros safely embedded in the trenches, it’s an eye-opener.    Use it well, my friends.