I recently wrote the following to the CFO of a client company as part of their evaluation of a strategic acquisition:
It’s a different approach if you expect it to keep chugging along versus your team adding value to supercharge growth.
Compare the above to a recent Wall Street Journal headline, “Skies Darken for Rooftop Solar Power.” The industry thrived on low interest rates and favorable government policies. Interest rates doubled and rates for selling back excess power dropped by as much as 30%.
A huge part of any business evaluation is the future. The past is the past and a lot easier to evaluate. The key is to get a handle on the future as best you can. While important for any business owner or CEO it’s doubly important for a buyer, who will be adding acquisition payments to the cash flow.
When asked about doing more due diligence, Warren Buffett replied:
“It’s interesting. We’ve made plenty of mistakes in acquisitions. Plenty. And we made mistakes in not making acquisitions, but the mistakes are always about making an improper assessment of the economic conditions in the future of the industry of the company.”
When looking at your business, a client’s, or a target acquisition it’s all about what the business can do, with the right guidance.
“Be fearful when others are greedy, and greedy when others are fearful.” Warren Buffett
“If they don’t give you a seat at the table, bring a folding chair.” Shirley Chisholm
