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Virtual StrategiesThis article contributed by David Braun, CEO of Capstone Strategic, and author of the forthcoming book, Successful Acquisitions.

The decision to make an acquisition is no small step. Needless to say, there is risk inherent in any acquisition, and a great deal of effort is required to achieve a good outcome. But these downsides can pale next to the potentially enormous rewards.

The acquisition process begins by asking a simple yet essential question: Why acquire? As business owners and executives see, the answer is more complex than simply ‘‘to grow.’’ This is why a precise resolution of this question is critical to success and will guide a search for the right company.

For context, below are the ten most common reasons that lead companies to embark upon acquisitions:

  1. Increase top line revenue
  2. Expand in a declining market
  3. Reverse slippage in market share
  4. Follow customers
  5. Leverage technologies
  6. Consolidate
  7. Stabilize financials
  8. Expand customer base
  9. Add talent

10. Get defensive

The reason for considering an acquisition is likely to match one of these overall goals. So far, however, this snapshot is too generalized to be useful. This is why it becomes critical to relate to the broad concepts to a particular situation.

The best approach is to undertake a strategic audit at the outset of the acquisition process. In it, senior level executives will develop a picture of a company’s current profile and where it stands in the marketplace.

A strategic audit also allows executives to think about where they want their company to be in the future: What will the ideal business picture look like in five or ten or even fifteen years?

Here, an often neglected key to success is the assessment of future market demand. How will a company satisfy future customers or clients as their needs evolve in the coming years? When corporate executives adopt this perspective, they are likely to identify gaps in their current capabilities, resources, or market reach.

Identifying those gaps is the first important step as a company prepares to buy.

The Business Puzzle

It is often useful to consider the business picture as a puzzle in which some pieces are firmly in place while others are misshaped, incomplete or missing. These problem pieces represent strategic needs a company must meet in order to realize the future vision of its executive team.

For example, if a company currently operates in the Northeast and its business vision calls for expansion to the Midwest, then the ‘‘Location’’ piece of the puzzle is incomplete. Or if a company’s current product line is computer software and its customers are migrating to mobile devices, then ‘‘Technology’’ becomes a critical piece.

Company owners and their senior level executives should look closely at their own business puzzle. What strategic needs are demanding to be met? Most likely, they will discover several.

I strongly believe that each strategic need of a business, each piece of the puzzle—whether it is location, technology, customers, talent, finance, or something else—requires a separate acquisition strategy.

In other words, every time a company heads down the path of acquisition, executives should be looking to identify and meet just one strategic need with each company they buy.

Think of the hiring of new employees, for instance. If a company has simultaneous needs in sales, accounting, and operations, they will not hire one person to fill all three spots. The qualifications for each position are unique and the company will look for three different individuals to fill those roles.

The same concept applies to making an acquisition. Having a single, clear purpose for an acquisition keeps executives focused on which markets to look at and which companies to consider. If they try to make one company fulfill multiple needs, they embark on a dangerous path that blurs their decision making. The risk is that they will find ways to justify acquiring almost any target they select.

This is exactly the kind of vague thinking that leads to bad acquisitions and problematic integration. Although it may seem that killing two birds with one stone is cost-effective, it is likely to prove far more expensive in the long run. Trying to fulfill multiple needs through one acquisition meets none of them well.

If owners and executives are determined to achieve a profitable result, they must be sure to follow this fundamental rule as they prepare for acquisition: Have only one reason to buy.