Tips for planning and performing due diligence before acquiring an off-reservation business

Tribes are beginning to regularly look for off-reservation investment opportunities as they seek ways to diversify their economies and related investments while Tribal gaming continues to mature as an industry and opportunities for gaming expansion become less attractive.

The decision to invest in off-reservation businesses is especially vital to Tribes with limited diversification choices because of their reservation’s size or location. Choosing the right investment helps Tribes grow, generate more revenue, and bring more value to their balance sheet and overall community. The right investment also provides Tribal members and nonmembers with more employment and career advancement opportunities.

Step one: Choose the right investment and team

The right investment

Tribes commonly diversify their business ventures beyond gaming to include businesses like gas stations, hotels, golf courses, and strip malls and more uncommon investments, such as banks and commercial lending, construction companies, bowling and amusement centers, and gaming consulting and management companies.

A best practice of the due diligence process for acquiring these types of businesses is to determine which one is the right investment for the Tribe. Items to consider include:

• Does the investment fit strategically and culturally with the Tribe and overall community?
• Does the business provide a strategic fit and leverage existing Tribal assets, or does the business provide products and services the Tribe doesn’t currently have?
• Does the Tribe have or can it get access to investment capital and at what cost?
• Does the Tribe have the expertise to run the business or will it need to hire, train, or retain expertise?
• What is the upside potential of owning the business? What are the downsides? This should include ways the Tribe can lose money with this investment.

The right team

Another key attribute of a successful business acquisition is a strong and well-rounded due diligence team that includes:

• Legal, accounting, and finance representatives from the Tribe
• Tribal business executives
• Tribal council members or others charged with governance