How to Avoid Buyer’s Remorse in Business Acquisitions

Unexpected operating expenses is a hard integration issue that is easy to quantify and therefore easy to identify. Some buyers will attribute surprise operating expenses to the inevitable costs of buying a business. However, that is not always the case. For instance, buyers who are interested in a merger or acquisition of a seasonal Alaska business typically account for fluctuations in workforce, demand, materials, and equipment. After all, Alaska’s economy is highly seasonal, with many industries such as tourism, construction, fisheries, and agriculture all experiencing a significant lull in operations in the winter months. That said, the ability for seasonal businesses to operate lean during off-peak seasons may not be feasible after closing, which may result in unexpected operating expenses for the business going forward.

Similarly, consider buyers who are interested in a merger or acquisition of an Alaska small business. As we know, Alaska has a vibrant small business community, with nearly 75,000 small businesses operating in the state. One key (albeit obvious) characteristic of small businesses is their small number of employees. As a result, most small businesses do not have robust back-office support, and that often impacts the businesses’ ability to know about and comply with applicable state and federal regulations. For buyers of small businesses in Alaska, that means a greater chance of unexpected operating expenses after closing due to regulatory penalties or legal fees.

While unexpected operating expenses are a common occurrence in M&A, they are not commonly considered as part of an integration strategy and therefore tend to decrease the probability of an acquired business reaching anticipated results after closing.

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