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measures that help them weed out those candidates that will be too expensive in terms of effort or of too little financial attractiveness.<\/p>\nPublic companies looking to acquire your growing enterprise usually have a few financial measures that help them weed out those candidates that will be too expensive in terms of effort or of too little financial attractiveness.<\/p>\n
The first rule: 10\/40:<\/strong><\/p>\n One of my company CEOs recently described his rule for acquisition success, and it resonated with me as a great goal for planning during acquisition exercises.\u00a0 This CEO states that he has made it work twice when acquiring companies, and that is enough for him to make it his rule for all future acquisitions.<\/p>\n If the target company can show a ten percent EBITDA (earnings before interest, tax, depreciation and amortization), then the acquisition team should be able to create a way to make the resulting acquisition yield forty percent EBITDA after re\u2013engineering the combined entity.<\/p>\n That\u2019s quite a goal to achieve.\u00a0 <\/strong>But there are obvious and not\u2013so obvious ways to make it happen, even if over time.<\/p>\n The second rule: \u00a0The 20\/20 rule<\/strong><\/p>\n If you are experiencing 20% annual growth and 20% net profit before depreciation and tax, or any combination that adds to 40% (such as 10% profit and 30% growth), you are a prime target.<\/p>\n How to \u201csell\u201d expense reduction and growth prospects<\/strong><\/p>\n [Email readers, continue here…]\u00a0\u00a0<\/em><\/span> Here are some of the checklist items your acquirer will consider. \u00a0Dual layers of senior management remain only during the transition period and Accounting and HR operations are combined as quickly as possible, as are customer service call centers, retaining specific product skills on the front line from the acquired company.\u00a0 R&D efforts may remain separate for a period or forever, but R&D management is consolidated as soon as possible to avoid territorial disputes and retention of inefficient development processes.<\/p>\n Sales organizations may or may not be combined, but senior sales management is consolidated so that commissioning, territorial management and product management functions all harmonize.<\/p>\n Facilities may become redundant or oversized after these efforts, allowing for consolidation of facilities as well.<\/p>\n If we follow the reasoning of our CEO who proposed the rule, we can drop an additional 30% of the net revenues (after cost of sales) from the acquired company to the bottom line.\u00a0 Not a bad goal, and certainly not a bad result.<\/p>\n","protected":false},"excerpt":{"rendered":" Public companies looking to acquire your growing enterprise usually have a few financial measures that help them weed out those candidates that will be too expensive in terms of effort or of too little financial attractiveness. The first rule: 10\/40: … Continue reading ![\"\"](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2015\/06\/business-risk-management-300x279.jpg\")
transfer of institutional knowledge from acquired to acquirer.\u00a0 The best performers from the acquired become candidates to outrank or replace their counterparts, showing that a business combination is not all one\u2013sided.<\/p>\n