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Acquisition Management—Avoiding Disaster

Robin A. Forte, Proceedings of 34th Annual Rocky Mountain Mineral Law Institute (1988)

There are several papers and books dealing in great detail with economic evaluation, due diligence, negotiation, and management. This is not one of them. As we discuss a fairly broad view of the acquisition process, I will attempt to point out hazardous areas and typical dangerous tendencies that one might have during the process; however, we will not cover every phase or area of acquisition.

Many points that I make are based on my own mistakes; some are based on the mistakes or advice of others. An acquisition, like any purchase, can be an emotional, tension-filled experience, making it difficult to keep a proper focus.

Our message is aimed at those with limited experience in acquisitions or acquisition management. While we may generally review most aspects of an acquisition, we will attempt to emphasize problem areas and danger signals in order that we might make fewer mistakes, reducing our chance for disaster. As an acquisition manager, you will have other people doing the work (at least in our model); you must be the imaginative thinker, to correct and anticipate problems.

One type of disaster we could encounter would be to make the acquisition, have no outside factors change (price or market), and fail to make our predicted return (due to lower production or bad title or a nasty lawsuit)items that our [19-3] investigation should have discovered