HOW TO KNOW WHEN TO BUY A COMPANY.

• Author: Daly, Steve

Take it from someone who's been through countless mergers & acquisitions. Here's how to know when it's right.

"I've made a huge mistake."

It's funny when G.O.B. from Arrested Development says it, but not when you say it yourself shortly after acquiring a new company.

Since I've been CEO at Ivanti, we've acquired 10 companies. Those companies range from over $100 million in yearly revenue to just over $1 million. And I'd say that nine of those 10 acquisitions have been a success.

That isn't always the case. At a previous company, we acquired a lot of companies and ran them into the ground. We had a very strong culture, we were very process driven, and we knew who we were. As a result, it was hard to bring someone in from the outside. Especially if they had an entrepreneurial mentality from a startup, for example. Needless to say, most of those unsuccessful acquisitions ended with people leaving the company.

Our culture was so strong that it was rigid. We didn't look at 'how can we merge what we both do well' when we acquired a company. It was more about 'you have to do it the way we do it.' Something that never works.

Our CMO tells a story about an acquisition he was involved in as the acquiring company. They were getting ready to sign the final documents and went out to dinner. The CEO of the company that was being acquired snapped rudely at a waitress for not bringing bearnaise sauce immediately. Our CMO looked over at his colleagues and immediately knew that they had made a terrible mistake. They could tell from that single interaction over dinner that the acquisition was going to be difficult.

So how exactly do you know if you should buy a company? How do you know if you're ready? And what are the factors to look at when you're considering buying a company? In my experience, here's what you need to know.

READ THE FINE PRINT

There are three things every acquiring company must consider: the culture, the maturity, and the market share.

Culture is huge. When we do an acquisition we look at the culture--not only of the management team, because they will often leave the business first--but the first line managers and the people on the ground. That's the culture that has to mesh. And it's not always the same culture found among the execs and the ground-level employees. The executive team at the company you're considering buying can have a very different culture, set of values, and priorities than the actual people doing the work.

Then there's...