Write the Downside Case Before Making an Acquisition

State what is being acquired, why it fits the ownership plan and how long it may reasonably be held. Then describe the likely exit channel, transaction friction and conditions that could make disposition slower or more costly.

The memo is not a prediction of failure. It is a way to prevent an attractive entry price from obscuring the full commitment.

Test condition, immediate work, carrying cost, specialist availability, financing and market liquidity as ranges. Include the possibility that records are incomplete or a claimed feature cannot be verified.

Use evidence for each range and identify which uncertainty requires inspection, legal review or other qualified expertise before proceeding.

Define the facts, total cost or unresolved risks that would make the acquisition unsuitable. A boundary written before negotiation is easier to apply than one invented while bidding or closing.

If new evidence changes the boundary, record why. Flexibility should reflect better information rather than momentum.

Compare the downside case with actual first-year cost, use, condition and administrative burden. Note which assumptions were accurate and which review steps failed to expose important facts.

The result improves the next acquisition standard. A decision process becomes more credible when it learns from outcomes instead of remembering only the successful ones.