STEPS IN AN ACQUISITION

There are four basic and not necessarily sequential steps in acquiring a target firm. The first is the development of a rationale and a strategy for doing acquisitions, and what this strategy requires in terms of resources. The second is the choice of a target for the acquisition and the valuation of the target firm, with premiums given the motive. The third is the determination of how much to pay on the acquisition, how best to raise funds to do it, and whether to use stock or cash to pay for the target. The final step in the acquisition, and perhaps the most challenging one, is to make the acquisition work after the deal is complete.

Developing an Acquisition Strategy

Not all firms that make acquisitions have acquisition strategies, and not all firms that have acquisition strategies stick with them. This section considers a number of different motives for acquisitions and suggests that a coherent acquisition strategy has to be based on one or another of these motives.