Acquiring is one of the faster ways to grow, and one of the easier ways to overreach.
It makes most sense when the thing you need already exists somewhere else: a capability, a customer base, a location, or people you cannot recruit quickly enough. It makes least sense when it is simply an alternative to fixing something at home.
Here is when acquisition is the right growth route, and when it is not.
When is the best time to use M&A to grow?
First things first, to help you determine if a strategic merger or acquisition could be right for you, let’s explore some of the scenarios in which this form of growth tends to be most beneficial.
1. Shortages in services or customers
If your business is doing well – but could do even better by filling a troublesome gap in its customer base or its selection of products or services – then a merger or acquisition could be the way to go.
Keep an eye out for potential targets that could provide your organisation with the elements it lacks, and approach them with your plans for growth, explaining how they would benefit in return.
2. Your business wants to find a foothold in new markets
If you are keen to expand into new markets but you don’t want to wait for this to happen organically, a fast and effective way to achieve expansion is through an acquisition.
By purchasing a well-established business within the market you’ve got your eye on, you instantly gain a firm footing and access to new customers and suppliers.
3. You need access to fresh talent
Depending on your industry, it can be tricky to find experienced workers who can help your company grow. As a result, you might want to think about a strategic merger or acquisition that would grant you access to an abundance of top talent with the specialist skills required to take your business to the top.
4. You need to cut costs while still managing to grow
Many companies embark on M&A activity with the goal of achieving cost synergies. By joining forces with another business – or by purchasing them outright – you can significantly reduce overheads and give your cash flow a welcome boost. This, in turn, frees up more resources which you can use strategically to help your company grow and expand.
5. You need to out-do the competition
Last but by no means least, if your business operates in a highly competitive market and you’re eager to find ways to fend off competitors, a strategic merger or acquisition could be on the cards.
By acquiring new talent, intellectual property, and financial resources, you automatically gain valuable resources that you can use to out-do your competition and gain a bigger chunk of the market.
How to grow through a merger or acquisition
If you’ve decided that embarking on a merger or an acquisition seems like the optimal route to fast and effective growth, the next question on your mind is surely going to be: what is the best way to expand using M&A?
The short answer: you need to come up with a carefully prepared plan for your merger or acquisition.
This plan should include:
- A detailed analysis of your goals and requirements
- Rigorous market research
- An identification of the specific synergies you want to benefit from through a merger or acquisition
- A list of the most suitable potential targets
Once you’ve prepared this M&A ‘roadmap’ you can then kickstart the process by reaching out to the targets you’ve identified to gauge their views on the prospect of joining forces.
Finding an ideal target that is keen to agree to a merger or acquisition may take some time. As a result, you might want to think about hiring the services of a business broker. A reliable and experienced broker has access to an expansive network of contacts spanning multiple industries, so they’re ideally placed to source and verify potential targets and make that initial contact.
What’s more, a broker can take over the entire acquisition process on your behalf, saving you a great deal of time and effort and improving your chances of achieving a successful deal.
Challenges to be aware of
While M&A activity has been used time and again to help companies expand, it’s important to note that there are potential challenges and obstacles that can interfere with your plans for success.
These include:
Cultural differences
Did you know that a clash of cultures is one of the most common reasons for mergers and acquisitions to fail? Even world-renowned businesses can struggle to get it right, such as Daimler and Chrysler or AOL and Time Warner. Cultural incompatibilities scuppered their deals and caused significant losses of money while causing huge stress for both employees and management.
To avoid this happening to you, your business needs to make cultural compatibility a priority as it assesses potential targets. Not only that, but as the deal progresses and becomes a reality, you need to ensure that communication is clear, transparent and positive, and that no one feels overlooked or undervalued.
Due diligence disasters
During the due diligence phase of your deal, there is always the potential to discover something unsettling, something which could potentially even derail the deal. Perhaps your target has a pending legal case or an intellectual property dispute, or maybe there is a discrepancy with their finances.
If this does happen then, depending on the severity of the problem, you can either opt to negotiate for a lower price and more favourable terms, or you can walk away and find a more suitable seller.
Loss of brand visibility
Sometimes an M&A deal can do the opposite of what you hoped, making your brand less visible rather than helping you to grow and expand your presence. This can cause serious problems, preventing you from acquiring the benefits you were hoping for and making the deal into more of a drain than a gain.
To prevent this from happening, it may be wise to take things slowly and focus on steadily growing the visibility of your newly formed brand.
How to have a stress-free acquisition
Keen to tap into the advantages that M&A can bring you, and set your business firmly on the path to effective growth? Then why not get in touch with our team here at Harris Acquire! We have years of experience in uniting buyers and sellers in harmonious deals that maximise value while minimising challenges.
With our help, you can embark on a strategic acquisition that unlocks valuable synergies and helps you spread your corporate wings in no time. What’s more, thanks to our exclusive Acquisition Finder pilot, you will benefit from a 30-day money-back guarantee so you can sample our comprehensive services with total peace of mind.
To find out more, simply give us a call on 01926 757100 or send a query to Hello@harrisacquire.com.
