Fergal Odowd has advised on acquisitions ranging from 400,000 euro to 12 million euro for Irish SMEs. He has a clear view on what goes wrong when surplus cash makes a board feel ready to buy.
Why does surplus cash create acquisition risk specifically?
Because it removes the discipline that debt imposes. When businesses borrow to acquire, lenders require detailed projections, integration plans, and covenant structures. When they use surplus, those checks often disappear. The board feels the money is already theirs to spend, so the rigour drops.
What gets skipped in surplus-funded deals?
Integration cost modelling is the most common gap. Businesses calculate the acquisition price and assume the rest is operational. But integrating a second entity — systems, staff, customer contracts, supplier terms — routinely costs 15 to 30 per cent of the purchase price in the first year. That is rarely in the surplus allocation plan.
Fergal Odowd — The surplus gives confidence. Confidence reduces scrutiny. Reduced scrutiny is where acquisitions fail.
Is surplus-funded acquisition ever the right approach?
Yes, when the target is small relative to the surplus, the integration path is simple, and the strategic rationale is specific rather than opportunistic. The problem is that most boards describe their acquisition rationale as specific when it is actually just optimism dressed in financial language.