THE BUSINESS I WISH WE'D BOUGHT

Every experienced acquirer has one.

The business they still think about.

The one that looked right, made strategic sense, and yet somehow never became theirs.

For me, that business was a third-party logistics (3PL) company that we seriously considered acquiring earlier this year.

Ironically, we weren't approaching it as outsiders. We were already one of its customers.

We'd worked with the business for several years, understood its operations, knew the management team and had firsthand experience of the service it delivered. In many respects, it was the ideal acquisition. It complemented one of our existing businesses, expanded our capabilities and presented opportunities for growth that would have been difficult to build organically.

On the surface, the numbers reinforced that view.

Revenue had grown consistently since inception. Gross margins were remarkably stable.

The business still had significant unused capacity, meaning it could increase turnover without substantial additional capital investment. Better still, a large proportion of its income came from recurring storage fees rather than one-off transactional work, creating predictable monthly cash flow.

It was exactly the sort of business sophisticated buyers look for.

So why didn't we buy it?

Because acquisitions aren't about buying the past.

They're about buying the future.

One of the disciplines we've developed when assessing businesses is to move beyond the financial statements and examine the quality of the earnings themselves. Historical profit tells you where the business has been. It doesn't necessarily tell you where it's going.

When we analysed the customer base, a different picture began to emerge.

One major customer had already left. Several others were reducing their monthly spend.

At the same time, we believed the business needed another senior hire before it could comfortably achieve its next phase of growth. None of these issues were fatal in isolation, but together they changed our assessment of the earnings we believed we would inherit after settlement.

Too many buyers value businesses by applying a multiple to last year's EBITDA and assuming those earnings will simply continue.

Professional acquirers ask a different question.

"If settlement occurred tomorrow, what do I genuinely believe this business will earn over the next two or three years?"

Those aren't always the same number.

In our case, we believed the historical earnings overstated the earnings we were likely to receive after taking ownership. We weren't questioning the integrity of the financial statements. We were questioning whether the business was entering a different phase of its commercial lifecycle.

Naturally, that affected what we were prepared to pay.

The seller, understandably, believed the historical performance best represented the value of the business. We believed the future required a more conservative approach.

Neither side was necessarily wrong—we simply viewed risk differently.

Eventually another buyer acquired the business.

Would we still like to own it today?

Probably.

Do I occasionally wonder whether we were too conservative?

Absolutely.

But that's one of the realities of acquisitions that isn't discussed often enough.

A disciplined acquisition strategy doesn't mean you'll buy every good business.

It means you'll occasionally walk away from businesses that may ultimately succeed because, based on the information available at the time, the risk didn't justify the price.

That's an uncomfortable reality for buyers.

It also highlights an important lesson for sellers.

Many owners assume buyers are paying for everything they've achieved over the past five or ten years.

In reality, sophisticated buyers spend far more time trying to understand what happens after they take ownership.

Historical performance creates confidence.

Future performance determines value.

Sometimes those two things align perfectly.

Sometimes they don't.

The businesses that consistently achieve premium valuations are rarely those with the most impressive history. They're the businesses that give buyers confidence the best years are still ahead.