4 Reasons to Approach Your Self-Funded Search Like a Researcher
Your acquisition deals are some of the most important research projects you will ever take on. Not only are you making what is probably your biggest investment so far, but you might be setting yourself up for life. This isn’t the research paper to start at 10 PM the night before it’s due. This is the research paper you begin as soon as it’s assigned and continue refining until it’s due. You should approach your deal like a researcher because the more you know, the less risk you’ll experience in your deal.
You Will Stay Objective
For self-funded searchers, acquisitions can be an emotional experience. You might be in a rush to get your deal done because your partner or family is putting pressure on you. You might just feel like it’s taking a long time, and you’re ready for the lifestyle change that comes with owning a new business. You might be interested in a specific deal for a personal reason. For example, you might like your target company because it’s in the industry that your late grandfather worked in his whole life. Or the company is in the town you want to live in. Each of these factors can make you biased as you look at a deal.
It’s important to stay objective. It will help you see the facts as they stand rather than your own idealized version of the deal. Simply put, staying objective can save you from making a poor investment. Approaching your deal like a researcher means that you are taking a step back and evaluating from a distance. This doesn’t mean you’re not looking deeply into the deal, it just means you’re looking for the true story without emotional input. This will protect you from getting enamored with your deal and letting your emotions guide your decision-making.
2. You Will Pay Attention to Small, Yet Meaningful Details
The devil is in the details, and just like any other researcher, you want to know them all. It may not seem like the small details about your target company will make a huge difference when it comes to making your decision whether or not to buy. The small details might just add weight to the information that is already swaying you in one direction or the other.
However, sometimes, bringing a small detail about your target company to light might convince you to drop your deal altogether. For example, if you look into a seemingly innocuous contract and find out that you’re going to owe a ton of money after the deal is done. Unearthing a small detail might also lead you down a path to discover something hidden but deeply important. That brings us to our next reason.
3. You Will Follow Your Instincts
Following up on leads is essential to thorough research. That means you shouldn’t brush off intuition. If you get a feeling that something isn’t adding up or something isn’t right, make like an investigator and follow up on it. You’ll either just ease your worries by finding out it was nothing to be concerned about or you might find out some essential information to making a deal that’s right for you. Only you know what that means. Only you know why a certain line of research might make sense in this deal but not in others.
When you approach due diligence like a researcher, you are primed to follow your instincts. You’re more likely to verify facts than blindly trust the seller or what you find in your target company’s financials. Trust your gut and keep looking until what you find makes sense to you.
4. You Won’t Overlook the Unexpected
Due diligence is not a one size fits all operation. How you go about your research will depend on many factors like the industry, size of the company, and openness of the seller. Thinking of your task as a research project will allow you to think outside of the box when evaluating your deal. Like the previous point advises, follow up on leads even if they point you in odd directions. For example, a question about your target company’s accounting system might have you talking to the company’s IT guy for two hours, but that might be some of the best information you learn about the company culture and history.
Remember that due diligence is not only helping you decide whether or not you want to buy the company, but it’s also giving you valuable information you’ll want to know once you do take over. Keeping that in mind might make you feel better about spending the extra time to gather information from unexpected places in the company.
There’s a lot to uncover during your due diligence process. Find some questions to start with in our resource:
