How to avoid a big disparity between what you think you’re buying and what you actually purchase.
By Kathy Yeary M
ost people would never make a big purchase for something like a house from a distance – site unseen. Sure, you can take a guided
tour online, watch a video or even have someone physically visit it for you. But if you don’t personally experience and investigate the house, neighborhood and surrounding area, there’s great risk of feeling surprise, disappointment, shock and regret after you sign the papers and move in. There may be a big disparity between what you thought you were buying and what you actually bought.
The same is true with mergers and acquisitions. An estimated 70 to 90 percent of all mergers and acquisitions fail to meet anticipated results (Harvard Business Review) for buyers and sellers because there isn’t enough research, due diligence or time to uncover what the true identity of each business is.
As Oak Street Funding has funded hundreds of mergers and acquisitions and serviced them for the life of the loan, the tales of disappointment can sometimes read
like a playbook. Whether you’re planning to make an asset or stock purchase, here are common mistakes and what you can do to avoid them and ensure a successful acquisition.
Mistake 1: The buyer doesn’t get to know all the employees and how they fit into the organization. Personnel can make or break an insurance agency. It’s not enough to read an organizational chart and job descriptions to research employee functions. Buyers need to take it a step further and understand each employee’s strengths, weaknesses and job responsibilities. This can only be accomplished by spending time with employees, asking questions and observing them doing their jobs. What’s more, buyers need to go beyond hearing what employees say about themselves and the company; they need to know what others say about them and to see the fruits of their labor. It’s also important to know what has been communicated to employees about the potential sale/purchase. This is especially important if the employee is a down-line agent with rights to commission streams.