Acquiring a company can be the quickest way to expand your business, access new markets or increase profitability. But this decision involves risks – and many entrepreneurs make serious mistakes that can turn an excellent opportunity into a huge loss.
At BLCG Consulting, we closely monitor several company purchase and sale operations in Brazil and the United States. We know that, with the right strategy, it is possible to make safe, profitable acquisitions that are aligned with your growth objective.
In this article, you will learn about the main mistakes to avoid when buying a company and how to act intelligently and safely during the process.
1. Not doing a professional Valuation
One of the biggest mistakes is buying a company without knowing how much it is really worth. Many sellers base the price on expectations or gross revenue, without considering liabilities, customer dependence, operational risks or growth prospects.
This can lead to the purchase of an inflated business that does not deliver the expected return.
How to avoid:
Request a complete business valuation, using methodologies such as discounted cash flow, market multiples and equity analysis. BLCG offers this service in a meticulous manner, adapted to each type of business.
2. Ignoring Due Diligence
Due diligence is an in-depth audit that reveals the true financial, legal, accounting and operational situation of the company. Ignoring this step is like buying a car without opening the hood.
Companies with hidden debts, labor liabilities or tax issues may seem promising, but they become a major problem after the acquisition.
How to avoid:
Count on a multidisciplinary team to analyze documents, contracts, tax records, lawsuits and hidden liabilities.
3. Underestimating the necessary working capital
You buy the company and, in the first few months, you find yourself lacking cash to pay suppliers, salaries and operating expenses.
This mistake happens because many buyers do not project the working capital necessary to keep the company running after the acquisition.
How to avoid:
Include a realistic estimate of working capital in your financial planning and prepare a reserve for the first few months.
4. Focusing only on revenue, not profitability
Not every company with high revenue is profitable. Some businesses have tight margins, high costs or depend on unstable customers.
The most important thing is to understand how much is left at the end and whether the model is scalable and healthy.
How to avoid this:
Analyze EBITDA, profit margins, cash cycle and customer acquisition cost. This reveals the company’s true financial performance.
5. Not analyzing the market and competitors
A company may appear stable, but be in a declining sector, with new technologies emerging or with the entry of stronger competitors.
How to avoid:
Conduct a complete market analysis: trends, entry barriers, regulations and consumer behavior. A good deal also needs to make sense in the context in which it is inserted.
6. Disregarding the organizational culture
You can buy the CNPJ, but you are taking with you people, processes and an internal culture that may or may not fit with your management style.
Cultural integration is one of the biggest challenges in M&A processes.
How to avoid:
Talk to the leaders, get to know the team, understand the company’s values and prepare a post-acquisition integration plan.
7. Not counting on specialized consulting
Buying a company requires legal, accounting, financial, strategic and even behavioral knowledge.
Many entrepreneurs try to conduct negotiations on their own, without technical support – and end up paying dearly for it.
How to avoid this:
Count on BLCG to support you from the search for the ideal company to the after-sales process. We operate in Brazil and the United States with services such as:
• Valuation
• Due Diligence
• M&A Consulting
• Strategic Planning
• Fund Structuring
• CFO as a Service
Finally, if you are thinking about growing by acquiring a company, know that it is possible to do so safely and strategically. But it is essential to avoid mistakes that can compromise the profitability of the business – and your capital.
