Jim Southern Case - Entrepreneur by Acquisition

Class: MHR 722 – Entrepreneurial Management

Jim Southern

1. Evaluate the strengths and weaknesses of the search criteria used by Southern in identifying acquisition targets?

Strength:

* Jim Southern had provided an extensive list of criteria for searching the company that Nova would be interested in. This is extremely helpful to narrow down the target for Nova and enable a efficient search process in such a big market like U.S.

* He clearly identified the criteria that would be a good fit for Nova size and capabilities in buying AND managing the acquisition target.

* The criteria screened out the high risk companies, which Jim Southern knew that would not be his style, especially after his experience with a small start-up right after he graduated from business school.

* Manufacturing and Distributing: This is a good criteria as both industries require high inventories that Nova would utilize for financial leverage.

Weakness:

* His criteria might not be the best set of principle for the search of an acquisition target that would best represent high opportunity for growth with “low cost, high leverage”. Focusing on “low tech” company with significant market demonstrated almost no opportunity for growth

* By targeting to low tech company, Jim Southern exposed Nova to the risk of acquiring a company that would be obsolete with the new trend and technology. With the advance and the change in technology, business environment and customer’s lifestyle, new innovation and technology might change the whole industry leading to the “low tech, no innovation” out of the market.

* Lots of the criteria were only qualitative and Jim Southern did not manage to quantify those principles. For example, how much would be defined as high assets, how much market share that he would be interested in etc.)

2. Specific to the American Forms acquisition, evaluate how well Southern did in his ‘due diligence’ and negotiation? What might he have done differently?...