BOLT ON ACQUISITIONS: HOW BIG / SMALL ?
I would love to hear from folks who have done a bolt or two on about the successes and failures they have had. General data available in the marketplace has been somewhat unhelpful on this subject. There appear to be ample attractive options in the marketplace for large and small deals, but what are the pitfalls or things that have worked particularly well for firms as they look to start 'dating' again.
We've looked at larger add-ons that were our size or bigger and it's a lot harder to make the numbers work, harder to finance, harder to hold onto equity, harder and riskier to integrate. We still look at larger ones, but fit, financing, and integration planning become a lot more important!
Additional items to look into for an acquisition:
-Does the product sell to same buyer (easier) or different buyer in same company? Or open TAM in a new market?
-Is it competitor takeout or consolidation? Or is it additional products to sell to your base?
-The costs of an acquisition (deal time, integration time, legal fees, etc) aren't that much different for a small vs a large acquisition so all things being equal makes sense to go as large as you think you can absorb and finance.
On the flip side, with that completed, we are currently working on a 10x acquisition. Opposite end of the spectrum size-wise but it will actually be easier as the client-facing products and services are very complementary and the teams, internal processes and procedures all fit together seamlessly.
In other words, the soft-dollar cost/impact of transition is at least as much of a consideration as the actual purchase price.