Avoiding common acquisition mistakes

Citation

(2003), "Avoiding common acquisition mistakes", Aircraft Engineering and Aerospace Technology, Vol. 75 No. 3. https://doi.org/10.1108/aeat.2003.12775caf.007

Avoiding common acquisition mistakes

Budding entrepreneurs could make a fortune on any one of the 104 companies. Plimsoll Publishing has named as the Best Acquisition Prospects in the Air Transport industry.

Named as part of Plimsoll's new Acquisition Guide are 104 fundamentally solid businesses that are under performing. Plimsoll's valuations on these companies suggest they could be bought relatively cheap yet yield excellent returns.

"If you want to go on the acquisition trail, you must have your own secret 'shopping list' of potential targets. It is essential though to do your homework first to find the right companies to target," says David Pattison, Senior Analyst at Plimsoll Publishing.

Pattison continues, "As the industry consolidates, this is an exciting time for acquirers. It is easy to overlook the fundamental requirements in successfully taking over another company. In my experience I have found six main reasons why acquisitions fail to deliver their expected return." Here are the six common mistakes David found that companies make in acquiring a company.

Reason 1 – Looking for companies through a keyhole

It is nearly impossible to find the right acquisition target based solely on one criterion or to study only those companies for sale at the time. The choices are usually weak and are not necessarily a good bargain.

The strength of Plimsoll's research is the ability to take the entire industry of 472 companies and analyse each one based on their acquisition attractiveness. Named in the full Acquisition Guide are the 104 companies as the Best Acquisition Prospects, the 67 highest priced options, and the 209 companies named as options to "pursue with caution". It is our belief that every company is a potential target.

Reason 2 – Paying too much for the company

Much secrecy surrounds the final deals of an acquisition and it is impossible to ever truly know the true price of a company changing hands. However, it is important to know where to start and what to expect to pay. Plimsoll's Acquisition Guide provides a company valuation on 263 companies in the industry with a full analysis of why some companies are worth more than others. A historical, current and future valuation is provided based on the company's last four financial years.

Reason 3 – The timing was not right

Waiting for a company to go up for sale is often not the best time to buy a company. The key to a prudent acquisition is spotting under performance early. Plimsoll's Acquisition Guide spots the classic acquisition profile and names 104 companies suffering financially yet are fundamentally good.

Reason 4 – Taking the acquired company in the wrong direction

This is where most acquisitions go wrong. Typically an acquirer reduces costs too much and therefore limits the future viability of the acquired company.

The Acquisition Guide identifies three types of targets all requiring different post acquisition strategies. The guide then produces a post acquisition scenario for every company suggesting that 81 should consolidate, 52 should expand and 130 simply need to tweak performance.

Reason 5 – Taking instructions solely from your advisors

Never accept a deal based solely on your advisor's instructions. Take some of the power back by pointing them in the right direction. Key to the research provided by Plimsoll is to give the decision maker access to the very best analysis, valuations and assessments of all the options in the industry.

Reason 6 – Getting your house in order first

Perhaps the most serious mistake in acquiring another company relates to the financial state of your own company at the time. If your own company is in bad shape, then an acquisition will not solve your problems – it will only create more. Then the only winners will be the banks and financiers.

Summary

Plimsoll's Acquisition Guide on the Air Transport industry helps you avoid these six common mistakes in making an acquisition by showing you exactly which companies look to be the best targets.

To obtain a no obligation free proposal or to purchase the guide, you can call Plimsoll Publishing on 01642 626400. Information is also available on their Web site: www.whatcompany.co.uk. Readers of this publication will receive a 5 per cent discount when mentioning this article upon ordering.

Details available from: Plimsoll Publishing Ltd. Tel: +44 (0) 1642 626400; Fax: +44 (0) 1642 626410; E-mail: plimsoll@dial.pipex.com