Are Sunk Costs Driving Your Acquisition?

You’ve spent a lot of time, energy and money on an acquisition…but should you still go through with it?

In answering this question, it can be tempting to cite the amount of resources that have already been invested as reasons to follow through with the deal, but this would be a mistake.

These sunk costs cannot be recovered regardless of the decision you make. Instead of focusing on past efforts, you should focus on whether or not the acquisition is truly a good strategic fit for your company.

While it’s difficult to walk away, I would much rather you cut your losses now than move forward and acquire the wrong company. With acquisitions you can’t easily reverse your decision at any time if things begin to go wrong. As you’ve experienced from the buy-side, acquiring (and selling) a company is a massive undertaking. It is far more expensive to buy the wrong company than it is to walk away. A bad acquisition can derail your strategy and cause operational challenges and integration issues. Ultimately it will result in more problems than benefits.

It can be easy to get swept away in the excitement of a deal, but sometimes we need to take a step back and ask ourselves, “Is the deal moving forward solely because of momentum?” If the answer is yes, it may be time to pause and reevaluate.

Learn more! M&A Express Videocast: When to Walk Away

Sometimes an acquisition that looked promising turns out to be less than ideal as you get closer to finalizing the deal. The question becomes: Should we proceed or should we back out? In this important videocast, you’ll learn clear criteria for abandoning an acquisition before it’s too late. The information here can save your company millions of dollars and years of heartache.

Photo credit: Ken Teegardin via Flickr cc