Editor’s Note: Buying Time

The open checkbook has returned — and all that comes with it. An increasingly hot mergers-and-acquisitions market has everyone buzzing, from the tire kickers to the serial buyers. In a clear sign that a revived economy has encouraged industry powers to expand their portfolios, the hunt is on.

With much of the action focused on big-name trophy brands, the behind-the-scenes jockeying is intense, and the rumor mill is in full gear. At the same time, the industry has seen a number of smaller brands go to bigger players as the brand pool continues to consolidate. Recently, the Stuart Weitzman deal was the subject of intense interest, with many CEOs bidding to add the coveted label to their stables. As one recently told me, “There just aren’t that many prizes out there.”

It’s true — the sure-bet brands and companies will continue to drive this acquisition conversation, but the narrative isn’t as simple as matching buyer with seller. With a number of industry leaders fighting to grab the prestigious names, the price-value equation is often distorted, and the race to win sometimes overshadows finding the right fit.

Of course, fit is often the most complicated issue in acquisitions. One of the industry’s biggest dealmakers recently told me that too many executives lean on stacks of financial data and routinely ignore more nuanced cultural and emotional feedback from partners and employees.

Those who are deep inside the deal-making process are often surprised by the sometimes emotional or minute details that can derail a purchase, again due to a lack of due diligence in certain areas and a commitment to knowing all the facts before making a bid.

If you revisit some recent big deals, armed with the hindsight of time and distance, it’s easier to see the overlooked (and seemingly minor) issues that turned out to be red flags.

There’s one deal that still sticks out among many — a deal that was sealed years ago between two very anxious parties. The seller was determined to make sure the buyer was prevented from learning the real story. The hasty buyer was interested only in expansion and neglected the deep dive the purchase called for. Despite the fact that many in the industry knew this pair wasn’t what it appeared to be, the sale went through — and years of agony followed.

At any point, the buyer could have called any major retailer (or this editor) to learn the true story of what they were buying. If they had, the asking price probably would have dropped or the deal would have fallen apart — as it should have.

So, in this renewed period of aggressive dealing, it’s important to remember the difference between a long-term fit and some short-term buzz. Obviously, timing is everything, but exhaustive due diligence and gut instinct should guide today’s buyers hoping to win the next big prize.

The right deal at the right time in the right place will ultimately determine the difference between success and failure, brain drain and capital gain.

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