Acquisition criteria and your initial acquisition plan

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DRJOHN2Dr. John Psarouthakis, Executive Editor, Founder and former CEO, JP Industries, Inc, a Fortune 500 industrial corporation. Adjunct professor, Strategy and Acquisitions, Ross School of Management, University of Michigan

This is the 3rd of short articles of my thoughts about Acquisition
of a business.

            An acquisition business plan needs to be developed before you begin your search to buy a company. Three overall categories of decisions need to be made: 

1)    Why do you want to buy a company?

2)    What type of company do you want to buy?

3)    How are you going to go about buying the company?

In determining why you want to buy a company, you should ask yourself and develop answers for each of the following questions:

1)    Do you want to run the business yourself or do you want others to help you?

2)    How long you plan to keep the business;

3)    Whether you plan to buy other businesses over time

4)    If buying additional companies over time, do you plan to buy related or unrelated companies?

5)    In determining what type of company you want to buy, you should ask yourself, at the outset:

6)    What industry are you interested in?

7)    How large a company do you want to purchase and manage?

8)    How profitable does the company need to be?

And in developing a plan for how you plan to go about buying a company, resolving the following issues at the outset will affect the types of investors you will attract and potentially, how successful your search will be:

1)    Where will you go for the money?

2)    Who will help you in your search?

3)    What personal arrangements will you need to make until you find and purchase the company?

4)    How do you plan to find the right company?

5)    What is your exit strategy? That is, how will investors be able to get their initial investment out of the business over time?

Clarifying these issues in your mind will advance your efforts at selecting the appropriate company.

Reference: “How to Buy the Right Business”
by John Psarouthakis and Lorraine Uhlaner

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