The Difference Between a Good Business and a Good Acquisition

One thing we’ve been thinking about more lately is that a good business and a good acquisition aren’t always the same thing.

You can find a business with strong margins, loyal customers, an experienced team, and a long operating history and still have a difficult acquisition on your hands.
 

The question becomes what you’re actually paying for and what has to happen after closing to generate an attractive return. Is the business still compelling if organic growth stays modest? Is there enough room to improve the operation? Are there logical ways to expand the customer base, add new services, or pursue acquisitions?

We’ve found that it’s easy to get excited about the quality of a business and forget to ask whether the entry price, growth assumptions, and downside case make sense together.

A great company at the wrong price can be a poor investment. A solid company with the right price and a credible path to improvement can sometimes be much more interesting.

Curious how others in the search community think about this. What usually makes the difference for you between a “good business” and a “good acquisition”?