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7 Acquisition Growth Strategy Mistakes Startups Should Avoid

acquisition growth strategy

Growing a company requires hard work and smart decision making. When startup owners are focused on meeting shareholder expectations, it’s possible to make acquisition growth strategy mistakes that can impact your startup in both the short and long-term.

 

At NorthStar Venture Partners, we understand what it’s like to grow a startup because we’ve done it. While we understand the pressure to grow quickly, we also know the pitfalls that can trip up business owners. Here are 7 acquisition growth strategy mistakes to avoid.

 

#1: Focusing Only on the Numbers

The financial aspects of acquisition tend to get a lot of attention -- and they should. Any acquisition affects your finances and you can’t afford to ignore that. However, if you focus only on the numbers, you could be buying trouble down the line.

The “soft” aspects of an acquisition are just as important as the money. To use the acquisition growth strategy successfully, you must consider both companies’ cultures and goals to ensure that it’s a good fit. If you don’t, then the likelihood is strong that the acquisition will cause more problems than it solves.

 

#2: Skipping (or Ignoring) Due Diligence

There’s no question that due diligence plays a huge role in any successful acquisition. One of the mistakes we’ve seen people make when implementing an acquisition growth strategy is taking due diligence shortcuts -- or ignoring potential problems that their due diligence uncovers.

You invest in due diligence for a reason. In the early stages of a deal, keep an open mind. If you become overly enamored of a deal’s potential before you truly understand it, you run the risk of going through with an acquisition that’s not advantageous to your company and its goals.

 

#3: Taking on Too Much Debt

You can’t acquire a company for free, but it is possible to overpay -- and laying out too much cash or taking on too much debt to close a deal can cause significant problems for any company. It’s important to be realistic about what you can afford.

We understand that it’s possible to get “deal fever” and assume that any expenses you incur now will be recouped down the line. But, the truth is that they may not be. It’s your job to take a realistic approach to acquisitions and not overpay or saddle yourself with unmanageable debt.

 

#4: Neglecting Your Existing Company to Chase Deals

Acquisition growth is exciting and we know many entrepreneurs are invigorated by the prospect of growing their companies quickly. However, we’ve also seen business owners get so caught up in chasing deals that they neglect their existing businesses.

The health and financial well-being of your company is an integral part of the acquisition growth strategy. If your company isn’t hitting its benchmarks and internal goals, no acquisition is going to save it. The key is finding a balance between identifying and pursuing deals and managing the day-to-day operations of your business.

 

#5: Not Having an Integration Strategy

In many ways, the most important part of any acquisition is what happens after the deal is done. Integrating two companies requires careful planning. That means creating and implementing a detailed integration strategy.

Your integration strategy must take many things into consideration, including:

  • Clients/customers
  • Employees
  • Software and systems
  • Processes and procedures
  • Company culture

Representatives of both companies should be involved in creating and implementing the strategy. We suggest getting input from employees at every level to ensure a smooth transition.

 

#6: Ignoring Staffing Needs

Acquisition growth strategy isn’t just about merging two companies. It’s about merging employees -- and dealing with changing staffing needs as your company grows.

There are two sides to staffing: making difficult decisions about when employees are no longer suited to your growing organization, and recognizing when you need to expand your talent pool to meet your growth needs. You’ll need to do both if you want your growth to meet your expectations.

 

#7: Doing the Deal Alone

Implementing an acquisition growth strategy can be expensive and for some business owners, the temptation to cut corners is irresistible. One way to do it is to attempt to do the deal on your own instead of working with an M & A advisor.

The truth is that not working with an experienced M & A advisor can cost you far more in the long run than it saves you in the moment. That’s because M & A advisors understand the potential pitfalls of acquisitions and have experience negotiating deals. You’re far more likely to achieve your growth goals if you have a skilled M & A advisor on your team.

 

Conclusion

Acquisition growth strategy can be an effective way to increase your market share and meet shareholder expectations. The key is avoiding the 7 mistakes we’ve listed here to ensure that your deals are advantageous.

Looking for an experienced M & A advisor for your next deal? Click here to book a call with us and learn how we can help!

 

 

If you enjoyed what you read about when is the right time to sell your business and would like to know more about what we do at NorthStar Venture Partners be sure to check out this page: https://www.northstarvp.com/startup-ma-advisory.

 

Julien Meyer

Written by Julien Meyer

NorthStar Venture Partners is led by Julien Meyer, MBA. A veteran of the tech community, Meyer is a 3x startup founder with 2 exits, a published author, a Harvard Business School Leading with Finance Alum and a Top Rated Startup Consultant (UpWork, 2018). Meyer advised on over 50 successful transactions before starting NorthStar. His experience has helped him understand the unique challenges that founders experience when trying to exit their ventures.