As with shopping for a new car, however, it's best to set some limits before stepping onto the lot; a shiny paint job and a smiling salesman, after all, have sent many a person home in twice the car they came for.
Being a disciplined buyer is particularly hard for entrepreneurs who haven't made acquisitions before. Advisers tend to scream "Buy, buy, buy," since that's how most earn a fee. In addition, some acquisitions are so seductive that you just fall in love with the deal.
Thomas W. Florsheim Jr. was practically born in love with the deal he finally made earlier this year. Mr. Florsheim, 44 years old, is president and chief executive officer of WeycoGroup Inc., maker of men's shoes that carry the Nunn Bush, Brass Boot and Stacy Adams brand names.
Weyco, based in Glendale, Wis., has been among the more profitable and better-run dress shoemakers, in a challenging industry. It runs lean, with just 293 workers squeezing out 2001 sales of $131.7 million.
Until last spring, Weyco had no debt and a tidy cash hoard from years of strong results. What it lacked was the brand name that is also its CEO's last name, Florsheim. Mr. Florsheim's grandfather sold control of the brand about 50 years ago. Its ownership bounced around, and the firm failed tokeep up with fashion, peddling too many wingtips and toecaps n the era of corporate casual. By late 2001, Chicago-based Florsheim Group Inc., its sales plunging and losses widening, was nearing insolvency.
Mr. Florsheim's father, also Thomas, had left Florsheim Group after its sale and in the 1960s bought control of what would become Weyco. Later, father and son traveled together on Weyco sales trips and talk invariably turned to buying the family namesake. The younger Mr. Florsheim says:"We've talked about it for 10 years, sitting around having a drink. We'd talk about how great it would be to get our name back."
And so, Weyco did, paying about $47 million to acquire the brand name, as well as 700,000 pairs of Florsheim shoes in inventory and other assets, as Florsheim Group liquidated its holdings.
And Mr. Florsheim sounds like a man in love. "You can spend $100 million trying to create the kind of awareness the Florsheim brand has -- and still not get it," he says. "I feel confident that it's going to be a very good thing for this company." He expects the brand to add as much as $100million to Weyco sales next year and bring Weyco's stock a wider following.
There are risks. The deal required Weyco to borrow money. Its management and systems will be stretched across a far larger operation now. The Florsheim brand, though a familiar name to consumers, is perceived by younger men as "their dad's shoes," Mr. Florsheim says, and is getting a major fashion overhaul.
Depending on Mr. Florsheim's management, it could turn out to be a great deal or a lousy one. It's too early to say. Weyco's last acquisition was "before my time," Mr. Florsheim says. Inside Weyco, "people had to get comfortable with buying a company and going into debt. There's always a concern that you take a good business and mess it up."
Danger Signs
While there's no reason to doubt the wisdom of the Florsheim deal, it certainly has some of the danger signs that analysts say to watch out for.
So-called strategic buyers -- meaning companies already in the industry of the acquisition, such as Weyco -- are more inclined to fall in love and overpay than so-called financial buyers such as equity firms, says David Barnes, a director at Houlihan Lokey Howard & Zukin, a Los Angeles investment banking firm. Mr. Barnes mostly represents sellers and says it's"my job" to get buyers to fall in love.
"Oh boy, the eyes glaze over and get real wide. There's this energy in the room," Mr. Barnes says. "It's like going on a first date and everything's clicking."
Another warning sign: The buyer has a strong desire to make sure someone else doesn't buy the firm. To this, Mr. Florsheim pleads guilty. "We made it clear," he says. "People viewed us as being more motivated because of the family name."
Don't Cut Corners
Acquisition advisers also caution against buyers cutting corners on due diligence because they're so eager to make a deal. If there is negative information, the infatuated buyer "doesn't even want to hear it," says Stewart Kohl, a managing general partner at Riverside Co., a private-equityfirm in Cleveland that buys small and midsize companies.
Mr. Florsheim says he doesn't shoot messengers. "I'm OK with dissent," he says, though there wasn't any on the Florsheim acquisition.
In the end, there were no other qualified bidders in Florsheim Group's bankruptcy proceedings. Could Weyco have paid less, then?
"I think we got a fair price," Mr. Florsheim says of the $47 million Weyco paid. Florsheim Group representatives "when we started were talking $80 million to $90 million. We were absolutely prepared to walk away. It's a tough thing. You can get sucked into it. Name or no name, it had to make sense from a business standpoint. Florsheim obviously has an emotionalattraction. But it has a good fit."
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