Warning: Merger Ahead

Tread lightly.

Growth by acquiring other companies can be a great way to see immediate growth, IF it’s planned and executed well.

This is not an easy trail.

You merge brands, product lines, team members, personalities, values… it can feel like an arranged marriage between unwilling parties.

Besides that, a bad deal can handcuff both businesses if you’re not careful.

You need to make sure that you are not overpaying for a business, and that your financing terms are friendly to your current cashflow. Especially when rates are high.

In my experience, and for a variety of reasons, when a new owner takes over a business the sales tend to drop right away. Some clients or customers are a flight risk anyway, and looking for an excuse to leave. Some are going to be surprised (but not delighted) at the notice of a merger. Others might have more of a relationship with a person than the brand, and decide to leave for that reason. Bottom line: it will happen.

Then it’s up to the new owner’s smarts, ambition, effort, and intuition to get customers to buy into the new ownership.

When forecasting the finances of your deal, expect sales to drop shortly after acquisition.

Mergers can be an amazing growth technique, but tread lightly.

This is from trail 10 of Profit Hiker: 11 Trails to gain lasting elevation in your business. Find the book right here and the program over there.