Finding the Right Acquisition Isn't Easy

Do it yourself or retain an expert?

Survey concludes results are better with an expert

The survey concluded that companies retaining an experienced advisor to search for, identify, negotiate and manage their acquisition process were much more successful than companies who made acquisitions without an experienced advisor. Companies with dedicated merger and acquisition people on staff faired better than those without an advisor.  

The survey was sponsored by Amvest Financial Group, Inc. one of the oldest investment banks conducting acquisition searches and advising on merger and acquisition matters. The survey was conducted by Media Research, Inc. (MRI) who specialize in business to business surveys. MRI contacted private and public companies regarding their success in making acquisitions.  

Only companies who said they had actively been seeking acquisitions for at least the last 24 months were included in the tabulation. Respondents were put into three categories; Companies who retained an outside advisor, companies with at least one person dedicated full time to mergers and acquisitions and those managing the process by themselves without a dedicated person. Of those responding 22% retained an outside advisor, 23% had internally dedicated people while the balance of 55% managed the process without dedicated people.

Respondents were asked how long it took from the time they began looking for an acquisition until they acquired a company. They were also asked how long it took from the time serious negotiations began until closing and on a scale of 1 – 10 how difficult the entire process was. They were also asked if they would retain an advisor next time around.

The results revealed that it took companies representing themselves without a dedicated person twice as long as those who retained an advisor. This group represented 55% of the total respondents. Of those, 34% took an average of 21 months from the start of the search until closing and 9 months from serious negotiations until close while another 21% are still looking for an acquisition. When asked how difficult they thought the process was on a scale of 1 – 10 with 10 being most difficult the average was 9 for the first acquisition and a 7 for the second acquisition. 56% of this group indicated they would hire an experienced advisor when making the next acquisition. This group also found it more difficult to obtain favorable terms and experienced more difficulty in negotiating a definitive agreement and financing for the acquisition.

The survey included 223 randomly selected companies with sales between $20 million and $2 billion seeking to make one or more acquisitions.

                                         Start to finish      neg. to close         Difficulty

Retained an advisor 22%     11 months          4 months               3

Dedicated people 23%         15 months          4 months                5      

As time permits 34%           21 months          9 months                9 1st  time 7 2nd

As time permits 21%           Still looking

Most companies working on a time permits bases had a very poor track record of locating suitable acquisitions in any reasonable time frame while many had not yet acquired company.

The results conclude that most companies embarking on a search for an acquisition candidate on their own will be unsuccessful, will have less favorable terms, and experience more difficulty in negotiating a definitive agreement for the acquisition and locating financing.
 

The survey also found that the actual structure of the transactions were less desirable to the buyer than structures that could have been negotiated on their behalf by an experienced advisor.

In most cases, the buyers represented themselves or relied on an excellent accountant or attorney, although one with little or no experience transactions of this type. The survey found some differences with private companies vs. public companies with the public companies fairing somewhat better when acquiring a company without an advisor or dedicated person on staff. The survey also found that the level of experience a dedicated person within the company had a barring on the time it took and especially on the time line from locating an interested company to acquisition.

Conclusion: over half the companies seeking to make an acquisition chose to do it themselves vs. retaining an experienced acquisition search firm or to hire or appoint an internal person. Those who choose not to retain an experienced search and advisory firm will find it takes much longer to find and close a transaction. They will have more difficulty negotiating a transaction on favorable term and finding financing…

"Amvest Financial Group, Inc. has a successful track record of providing proprietary acquisition candidates for our clients and in negotiating successful acquisitions on their behalf,” said Charles K. Oppenheimer, Jr., President and CEO of Amvest Financial Group, Inc.