How to Acquire the Right Business

About the Book

Buying a company is a demanding, complex process requiring a wide range of skills and abilities. If you understand this process thoroughly, then you are far more likely to make the right purchase decision. Whether you are buying the corner ice cream parlor or a $100 million business, following certain steps will enhance your chances of successfully operating a profitable venture once the deal is closed. This book should help you to visualize what really goes on in the making of a business deal. Basis for the Book Information for the book is drawn from several sources. The book heavily reflects the first hand, practical experience in deal-making by the author Dr. John Psarouthakis. He has led the buying process for about 40 acquisitions and has been a part of a team of a dozen others during his business career as an entrepreneur and business executive. Most of his direct experience comes from purchasing and selling deals for his own two companies, J.P.Industries, Inc and JPE, Inc. In the 1980´s. Psarouthakis founded and built J.P. Industries into a Fortune 500 company by acquiring underperforming auto parts and plumbing products manufacturers, selling the company to a British conglomerate, T&N, PLC, in 1990. Next, he founded JPE, Inc., which manufactured and distributed auto and truck parts for OEM and the aftermarket. Although. Psarouthakis´ experience draws heavily on the manufacturing and distribution of durable goods sectors, many aspects of the process are the same, regardless of the industry. Interviews conducted by co-author Lorraine Uhlaner with entrepreneurs involved in retailing, service and construction sectors and other published information about the acquisitions process also influence the content of this book. The Importance of Careful Planning A carefully planned and executed search process is likely to improve your odds of finding a company with which you can be successful. Too often, people rush into deals only to find out later that they did not purchase what they had expected. They suffer negative business consequences, such as lower than anticipated profits and sales, as a result. The alternative, careful planning, may cost more initially, and require more effort, but is likely to lead to better business results in the long run. Various studies have found that as high as 60% of acquisitions made fail to meet the acquisition performance goals, ROI, ROE, etc., that were set at the closing and which influenced significantly the price paid. Just 25% met or exceeded those goals; the remaining 15% were indeterminate. There is one overriding reason for this high rate of failure and that is overpaying for the acquired company. Overpayment is a result of 1) an overoptimistic expectation of the market, 2) a higher than realistic estimate of internal improvements/developments, and 3) allowing oneself into a horserace leading to an overprice, due to the bidding process that the seller has succeeded to establish. In order to avoid as much as possible the above, this book presents a process based on many years of experience that resulted in the acquisition of over 50 deals and equivalently the sale of such acquired companies. Successful Acquisition Process - 16 Steps One enters into a rather specific process when one decides to acquire a business and particularly the "right" business. You must manage and control the process if the result is to have a good chance to be the desired one. The acquisitions process involved several distinct steps and sub-steps that need to be attended to with extreme care and dealt with expertly and skillfully. These steps are: 1. Know what you want to acquire. 2. Set up criteria to guide you on what you want to buy. 3. Set up a plan on how you will proceed. 4. Identify/build your team that will work, do, and manage the process with you. 5. Develop a network of credible sources for acquisition candidates. 6. Screen

About the Author

Dr. John Psarouthakis Dr. John Psarouthakis is the founder and former chairman / CEO of JP Industries, Inc. The company was listed on the New York Stock Exchange, became a Fortune 500 industrial company, and was merged with T&N, plc, He is also the founder and former chairman of JPE, Inc. which traded on the NASDAQ exchange until it was sold to a privately owned company. Dr. John has led the acquisition and subsequent management of over 50 businesses in the USA and Europe, including two joint ventures, one in Japan and one in Italy. Currently, Dr. John, Coaches CEO’s and high level executives on Corporate Strategy, Growth Business Models, and Acquisitions. Dr. John taught at the Ross School of Business of the University of Michigan, focusing on corporate strategy and acquisitions. He was Sr. Lecturer at MIT on “Business Leadership”. He has received many awards, including twice being named Entrepreneur of the Year by Inc. Magazine.; Received the Entrepreneur of the Year award by the Association of Deans of Schools of Business, USA; Received the Corporate Leadership award from the Massachusetts Institute of Technology (MIT). Lorraine M. Ulahner Lorraine M. Uhlaner is Professor of Entrepreneurship and Director of the International MBA Program at Nyenrode Business Universiteit. Prior to coming to Nyenrode, Dr. Uhlaner was the founding Director of the European Family Business Institute at Erasmus University Rotterdam (EUR) in the Netherlands. Before coming to the Netherlands, she was founding director of the Center for Entrepreneurship and a Professor in Management at Eastern Michigan University.