Spending in a down economy: One factor to doing it right, due diligence.
You might be wondering how you can spend appropriately in a down economy – especially after seeing how Congress has spent our money lately. But there really are opportunities in a down economy that make sense to some businesses. Take for example the latest transaction between Amazon and Zappos, a business decision that had some strong upsides. But this is one that captures the headlines not just because of their household name but also because of their sheer size.
But other friends of ours have been busy in the merger and acquisition world. Over at Tully & Holland, there have been several transactions lately – S&S Worldwide purchasing a Canadian company and AmeriMark Direct acquired by the Feel Good Store for example. Seems like every week we see something from different companies. And these transactions can be good in a down economy, acquisition costs can be lower, it can help level off some of the peaks and valleys, and most importantly add to the bottom line.
But acquiring a company with the best of intentions will never be successful if you do not perform the proper due diligence ahead of time. Most companies look at the financials, the inventories, the marketing files, etc. But several companies do not look at the infrastructure – meaning the software applications in place, the warehouses or the call centers. Most likely, you do not have the same software applications so will you use two different applications, will you convert them to yours or vice versa, how will you convert the customers, items, vendors etc.? What integrations are in place and how will those change?
From a warehouse and call center perspective the same holds true for the applications but also the facilities. Is the warehouse at peak capacity, how much time do you have on existing leases? What capital expenses should be made to improve the facility? Will you merge them in to your facility and close down the other? If you do this, what will be your transition plan? This true for the call center as well.
Acquiring a company in a down economy in some cases can be very advantageous to you. But only focusing on the financials or the marketing files can be very disastrous. By not looking at the infrastructure you can seriously affect or permanently damage the existing customer base of the company you are acquiring – those are the people you want after all. By choosing not to consider what to do from a facilities or systems perspective could mean that you end up spending way more than necessary, potentially costs that you never counted on having.
Let our firm help you with the infrastructure and operational side of the due diligence. We can help you develop a strategy for evaluating a business’s infrastructure and operations, as well as how to merge the two businesses once the acquisition is complete. A seamless, efficient acquisition is extremely important to your investment and to the customers of the company you acquire.
Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.
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