For owners/senior leaders who are considering a strategic acquisition of a "treading water" or worse printing company, here are “Ten Questions” and “Ten Information Requests” to help advance your conversations.
The questions relate to assessing the impact of their problems on the value of the business and to ascertain how much time is left on the clock.
Ten Questions:
- To what extent, if any, has customer satisfaction been negatively impacted by current financial problems?
- Have they been overly aggressive on job pricing to bring in work, resulting in “churning” of cash but training customers to expect unprofitable pricing?
- Have they lost any key employees recently?
- How would they assess the impact of the “rumor mill” that is usually fueled by the suppliers?
- Is the company experiencing daily cash crisis that is eating up time and energy of accounting staff and production?
- Are any of the suppliers threatening litigation? Any pending lawsuits?
- Are taxes up to date?
- Are they behind on lease payments, if any?
- How would they assess employee morale?
- Who are the owners and are they on the same page?
Ten Information Requests Beyond Financials:
- Loan documents including Guaranty documents
- Lease agreements
- AP aging with comments on trouble spots
- Will need to obtain a UCC search ASAP to confirm lien holders on assets
- Equipment list: any recent appraisal?
- Customer analysis (no names, just a summary customer by customer, indicating who has the relationship)
- AR aging
- Summary of the building situation
- Summary of compensation for owners and key employees
- Contact info of advisors
You are probably thinking that the questions and info requests send a negative tone, and you are right. That is one reason NAPL client-members who pursue Growth by Acquisition bring in a consultant to politely ask the tough questions. Frequently the conversation then gets easier once the invisible barrier of humility is gracefully removed. Then the task at hand becomes one of "how can we work together" to achieve objectives. By that point, chemistry is enhanced and there is greater insight on understanding the situation, which leads to creative transaction structuring.
John
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