Once a company gets to certain size, Senior Management starts to fall in love with the idea of an acquisition as their primary growth strategy.  Desperation often sets in with a desire to buy anything if it will "move the needle".  Mind you, acquisitions should never be the growth strategy; they are at best a tool.  Strategies are things like entering a new market segment or geography, adding additional complementary products to your line, buying technology, expertise, or a brand that would take years to develop, etc.  When you approach the problem as just buying revenue, your chances of success are pretty small.  In fact, McKinney reports that 70% of all acquisitions fail to meet their revenue expectations.  Yup…70%.

That's not to say acquisitions are a bad idea.  They can work brilliantly to speed up growth.  But you have to have the right approach.  Part of the problem is the common misconception that due diligence is the accounting and legal team's problem.  In fact, very few failed acquisitions are due to the basic due diligence issues of that we look for in the company's data room.  The real issue is almost always the big picture items like the strength of the acquired management team, their product competition, the fit of the new company into the Acquirers' strategy and culture, and projected cost and revenue synergies.  Those issues sit in the CEO's office.

The point is a simple one; due diligence is important, but real due diligence may not be what you are thinking.  Reviewing the big picture items are key to success. 

Click here for more information on the five key questions your team should ask before due diligence is done.