Acquisitions – Creating an Action Plan

mergers and acquisitions
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To help guarantee the success of an acquisition, you need to create an acquisition action plan.  There are some people who will buy a business during a business meeting, but those transactions don’t always fair well.  Within 9 months to a year after a purchase, the owners are stressed out because the business isn’t doing what they expected it to. 

Create an acquisition action plan that describes what you plan to do once you take ownership of your new company.  Create this plan during the formal due diligence phase so you’re ready as soon as you close on the deal.  You will need to thoroughly understand the company and not only the industry in which the company operates in.  You also need to determine if the business is currently operating with up-to-date technology and practices and if you’ll need to make any changes.  If you find areas of the company that are performing low, pin-point the causes so you can develop a plan of correction. 

The overall action plan will include some shorter action steps in different departments of the company.  After you’ve decided what changes are needed, you will need to specify what will be done, how much it will cost, how long it will take, who is going to do it, and the results you’re expecting. 

There are two objectives in a good acquisition action plan: the due diligence results are documented and it identifies the recommended strategies and action plans that will make the company a successful acquisition.  The plan needs to identify who will run the company and how the company will be run.  The following sections are found in an acquisition action plan:  preface, brief history and overview of the acquired company, industry overview, description of operations and organization, strategies and action plans to implement the strategies, and financial statements. 

The preface of the plan explains the purpose, the members who create the documents, summary of the plan, target dates, and who is responsible for each assignment.  Following is an example of what the preface can look like.   

Phase 1 – assessment of current operations

Phase 2 – development of strategy and action plans

Phase 3 – finalize and sign purchase agreement

Phase 4 – assume control

First day actions: employee meetings, customer notification, vendor notification, physical inventory calculation, fixed asset appraisal

Phase 5- post acquisition implementation of action plans and follow up 

The history and overview section should include a company description, a history of ownership, a divestiture reason, descriptions of products, financial summary, and key employees. 

The overview of the industry should include information about the whole industry, market segments, and immediate competition along with product and customer information. 

The company operations and organization section will vary depending on the industry.  Basically, it’s a complete description of the current company operations and organization.  For example, a manufacturing company would detail sales and marketing, manufacturing, distribution, warehousing, inventory control and purchasing, human resources, management information systems, service, and legal issues. 

The strategies and action plans section is the key to the future success of the company.  It details the issues and action plans for the major areas of the company.  Each action plan will describe the problem and a history of what lead to the problem.  Each issue will have a detailed plan of action and who will be responsible for taking that action along with a brief budget estimate, time line and expected results. 

The financial statements section will provide historical financials including forecasts and projections.  Income statements, balance sheets, cash flows, and accounting policies should be included.

Source: www.blogs.law.harvard.edu

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