In this, the third in a series of blogs on why, how, and when you might consider exiting your talent development business (see Part 1 and Part 2), perhaps the most important process in which you must engage is to conduct full due diligence.
Here are 12 possible pitfalls in the due diligence process that could lead to less than optimal results, thus warranting your detailed assessment and analysis.
1. The engagement period with your buyer is far too short, which leads to not fully understanding what each party brings to the table and thus how to optimize each.
2. The buyer feels you have an offer that closes a gap in their own business, but it really doesn’t. As a result, the two sales forces stay true to their respective offers yielding minimal to no real synergies across the combined businesses.
3. You really don’t understand how your buyer goes to market or even their business model, and when they end up not matching, it makes it nearly impossible to operationally bring the businesses together.
4. While your buyer has strong top executive support for the acquisition, they really don’t engage other senior people in the decision process, forcing it down the rest of the organization and ultimately undermining the entire process.
5. Your buyer’s champion leaves the business or moves to another role after just a few months and thus continued total support is difficult to muster from the new leaders, not fully engaged with the buying decision.
6. Your buyer’s sales force and deliverers of the offer never really buy into the whole acquisition idea given they couldn’t see what was in it for them, resulting in little to no reason to support the integration of your business.
7. Your buyer doesn’t give the rest of the organization any real meaningful incentives to sell or deliver your offer, resulting in their continued ease with which to stay in their own lane providing what they were already getting paid and rewarded to do, thus not embracing what your business has to offer.
8. The acquisition happens too fast such that it is difficult to optimally and quickly integrate the two entities, resulting in confusion and poorer performance by your part of the business, thus minimizing the opportunity to obtain earnouts if they are part of the deal.
9. The buyer doesn’t continue to support your business in the way promised with no consequences for not doing so, thus jeopardizing any earnout potential for you.
10. The buyer takes more than gives, seeing your business more as a stand-alone providing added resources to its business but not reciprocating to build up yours.
11. You are enticed by the financial deal given where you are both personally and professionally at the time of the sale. Your overanxiousness to sell your business and fear that no other options will surface results in a mismatch of business integration activities, thus underleveraging both entities.
12. Key employees of your business leave relatively soon after the deal is closed since they really hadn’t signed up for the new arrangements, didn’t want to be a part of a huge business, or because “it isn’t like it used to be.” Without the proper incentives to stick around, cultural and performance challenges arise that are hard to recover from.
Of course, it isn’t likely that all 12 of these issues will surface although not totally impossible. However, any one of them—or a combination of just a few—could undermine what looks like a great deal on the surface. Doing your proper due diligence is critical to your successful exit.
