Planning an Acquisition: What Smart Acquirers Know Before They Buy

Acquisitions can accelerate growth, expand market presence, and strengthen competitive advantage, but only when executed with clarity and discipline. In a recent episode of Profitability Playbook: The Simple Numbers Podcast, host Brandon Gray sat down with Simple Numbers consultant David Mills, who distilled more than two decades of acquisition experience into practical insights every prospective buyer should understand before pursuing a deal.

Why Deals Fail Before They Start

When evaluating a potential acquisition, many buyers assume the financials will tell the whole story. According to David, that assumption is one of the earliest and costliest mistakes acquirers make. “Sure, you can say, ‘Okay, we can afford this company…’ but there's other things to consider.” Sellers sometimes back out late in the process due to family pressure or emotional ties, even after months of due diligence. As David puts it, “You've also got to be able to get a deal done,” which means understanding personal motivations, family dynamics, and legacy concerns just as deeply as the income statement.

Misconception About Scale

Acquirers often gravitate toward small targets, assuming they’ll be simpler. In practice, David learned the opposite. “It takes just as much time to buy one location of a company as it does of a company that has 20 locations.” The legal review, operational assessment, and financial verification steps are nearly identical regardless of company size. This equal workload often makes smaller deals less attractive once true resource costs are understood.

Operational Dependency: The Silent Deal Killer

Many acquisitions look promising until the buyer realizes how dependent the business is on its owner. When that owner exits, as often happens, the buyer is left absorbing far more operational burden than expected. David stresses the importance of examining this dependency upfront: “If this owner's going to go away, can we run the business without them? How much effort is it going to take?” If the honest answer is uncertainty, the acquisition risks become a distraction rather than a growth engine.

Red Flags Hidden Behind a Good Story

One of David’s most instructive experiences involved a seller who consistently misrepresented the business's foundational aspects. “He would paint a story and just paint a story,” David recalls. After closing the deal, his team discovered that the seller had overstated inventory by $1 million. The aftermath was arduous and reshaped their approach to diligence. “You really got to look at the numbers… and not just believe what people are saying.” The lesson is clear: compelling narratives should always be tested against verified data.

When the Numbers Look Bad, but Opportunity Is Hiding

Some of David’s most successful acquisitions were companies struggling not because of market weakness, but because owners avoided making difficult decisions. Many refused to reduce staff, close underperforming locations, or adjust product lines, even when weekly gross margin no longer covered payroll. One such business was losing money rapidly before acquisition, yet “three years later, they were a huge success story” once decisive changes were implemented. For buyers with the skill to fix a specific operational issue, these underperforming targets can become the strongest long‑term wins.

The Most Common Mistake: Losing Focus on the Core Business

Deal-making consumes time and attention, and David warns that buyers routinely underestimate this. “That acquisition needs to be bolt-on. It needs to be something that's going to add value, not something that's going to distract attention.” When leadership becomes too focused on the purchase, the existing business often falters. Declining performance during the deal process can even cause lenders or buyers to walk away.

Final Thoughts

A final warning from David: if both sides seem overly excited, proceed with caution. “If you're super excited about an acquisition and the person you're acquiring is, it's probably not going to be a good deal for either one of you.” Balanced tension, not enthusiasm, typically signals a fair transaction where each party feels they’ve given up something meaningful.

If you’d like help navigating an acquisition to position yourself for maximum profit and long-term sustainability, contact us. We’re here to help.