Organic growth is vastly superior to acquired growth.
ADAGE
Never a Buyer But Seller Be
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RESPONSE
Organic growth is vastly superior to acquired growth. Mergers of equals are doomed to failure. Acquisitions are one of the most capital-intensive activities in which you can engage. Statistically, most acquisitions are failures from the perspective of the buyer. It is in the nature of the process that there is always at least one bidder with enough hubris to overpay for a company in play. This means that it is almost certain that you will never pay less than fair market value (and often more). Most of the time you will not be able to recapture that value after the acquisition. If you want to buy low and sell high be the seller, not the buyer. Acquisitions are the devil’s playground. The motivations driving acquisitions are typically vanity and greed, which never result in good or faithful stewardship. The professionals engaged to complete an acquisition are rarely ethical or trustworthy, as they are focused on maximizing their own self-interest. Don’t pay for another’s business. Over time, buy their revenue with the profits you retain from that revenue. If you do an acquisition, make your purchase agreements contingent upon business retention so that you are buying their business with potential future earnings. Remember, Satan excels at this sort of trickery and temptation.
SCRIPTURE
Proverbs 31:18-19 She sees that her trading is profitable, and her lamp does not go out at night. In her hand she holds the distaff and grasps the spindle with her fingers.
Isaiah 30:6 (ESV) …Through a land of trouble and anguish, from where come the lioness and the lion, the adder and the flying fiery serpent, they carry their riches on the backs of donkeys, and their treasures on the humps of camels, to a people that cannot profit them.
QUESTIONS
How do the Scripture(s) apply to the business adage?
Are acquisitions the devil’s playground? Why?
A larger, secular competitor is for sale. The price is affordable and you could arrange the financing necessary to close the deal. Acquiring this business would provide you with a great opportunity to introduce your Christian faith to a secular audience. Is this reason good enough to buy it?
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