Issue link: https://read.dmtmag.com/i/585738
34 Oil Prophets BUSINESS STRATEGIES I am going to pass on a valuable secret acquisition weapon to you! While you don't see me issuing press releases and publicly announcing who is buying who, I've been involved in scores of confidential buy/sell transactions over the past two decades. I love matching family companies with other family companies and making great culture fits where everyone makes money and is happy! What I came to realize was that too many marketers were wasting needless hours contemplating, studying and even structuring and massaging acquisitions that simply were not good fits. Their desk was being cluttered by every Tom, Dick or Harry broker sending out multiple solicitations, so all of sudden growing marketers were faced with scores of opportunities. The families would spend hours talking about deals, going around in circles. I knew I needed to do something to get them clear and unstuck. I've been a believer in rating matrixes, using them in credit and project prioritization for years. So my solution to get them unstuck was to help each family create a rating matrix to filter acquisitions. Since each company's sweet spot and strategy is different, and strategy is fine-tuned and even redirected over time, each matrix is customized to exactly match what the company truly needs to catapult to the next level. And best of all, you don't need me to do it! Here's how… First, in general, the components of the matrix should include preference in geography, sectors/specialties, size, business core values/culture fit, physical assets (with specifics), technology, and people assets (with specifics). You can add or subtract, making the matrix fit your exact needs. The act of purposefully creating the matrix as a family team allows for meaningful dialogue and unveiling of differing views and preferences. The team approach gets those differences out on the table where they can be dealt with effectively and consensus and agreement built. It's far better for these discussions to happen in a board room building the matrix prior to any emotional pressure of an eminent acquisition while everyone still has cool heads! For example, I was working with a family where suddenly a mixed wholesale and retail opportunity had presented itself through a broker. This family had sold off some retail years before so was totally out of that sector. While half the family loved the idea of a retail presence, the other half was not thrilled with going back into a situation with so many employees again. This raised healthy discussion over the family's objectives and different ways their volume and profit potentials could be achieved. As the family gains clarity, I'm a stickler for including some sort of Return on Assets (ROA) component. Any acquisition should incrementally add to ROA and not dilute. I'm not opposed to buying distressed situations, but the forecast must show the end result increases the overall ROA on the combined operation. If the acquisition lowers the ROA, the acquisition will effectively lower the overall value of the family's holdings, making their pre-acquisition assets LESS valuable than before the purchase. Obviously, this defeats the objective of creating family wealth! It's a good idea once the family has created the matrix to have trusted outside eyes review it before putting it into active use. This can be your outside CPA, a trusted banker, myself, or any other professional you trust. Betsi Bixby Meridian Associates Using an Acquisition Rating Matrix to Save