When it comes to the topic of acquisitions, cross-industry deals tend to be viewed as a bold move – sometimes even a foolhardy one.
After all, investing significant sums of money in a business from another sector is a decision that could go horribly wrong. However, if done correctly, cross-industry acquisitions can turn out to be successful for both companies involved, allowing them to tap into new synergies and leverage entirely fresh resources.
If your company is considering taking a brave step into the unknown and making a cross-industry acquisition, we’ve compiled some top tips to give your deal the best chance of returning a solid ROI.
Real-life success stories
Before we delve into the tips and tricks of navigating this complicated M&A strategy, let’s cast a cursory eye over some real-world examples. These deals are testament to the benefits of cross-industry acquisitions, when they’re undertaken with due care.
1. Merck acquiring Versum Materials, Inc.
Back in 2019, the science and technology company, Merck, announced the successful acquisition of Versum Materials, Inc. The latter specialises in providing special materials and delivery systems for the world’s semiconductor and display sectors.
Through Merck’s €5.8 billion acquisition, the German company not only gained a new workforce of over 2,300 but also put itself on a trajectory to tap into annual synergies of €75 million from 2022.
2. Amazon acquiring Wholefoods Market
Amazon is certainly no stranger to savvy business decisions, and the global behemoth proved this yet again when it acquired Wholefoods Market. The $13 billion deal took place in 2017, with the aim of ‘breaking’ into the grocery market; a move Amazon replicated in the UK by partnering with Morrisons.
Although the acquisition posed a few difficulties, Amazon quickly reaped the benefits, witnessing a prompt spike in grocery product sales. Meanwhile, Wholefoods benefited from Amazon’s impressive supply chain setup and logistical innovations.
In a nutshell, this bold acquisition brought sizeable advantages to both businesses, and their customers.
How to get cross-sector acquisitions right
Now you’ve seen the evidence that it really can be done, let’s move on to the nuts and bolts of cross-sector acquiring. Here are our insider tips and suggestions.
1. Develop a well-defined M&A strategy
To give your cross-sector deal the best chance of succeeding, you need to lay the groundwork very early on. This means coming up with a detailed, long-term strategy, complete with specific goals and objectives that you want to achieve. This strategy should also be shored up with plenty of market research to give you a solid understanding of the new sector you’re entering.
While it may take time to develop, having a clarified acquisition plan will help you find those targets that are best placed to make your vision a reality.
2. Find a mentor
One of the most common mistakes buyers make is to try and enter a new industry alone and without help. This can lead to their new venture failing thanks to lack of experience and a poor understanding of how the market works.
Thankfully, there is a way to avoid this mishap – by finding a mentor in your chosen sector.
Seek out a seasoned business leader and ask them for advice and coaching on how businesses in the industry function and what red flags you should look out for. They can lend you their expertise and help you build up a clear picture of how businesses operate in your new sector and what type of business you should watch out for.
3. Due diligence, due diligence, due diligence
Did we mention due diligence? When you do find a prospective acquisition target, it’s vital that you do your homework thoroughly. Take the opportunity to really poke about behind the scenes and scrutinise their business model, their financials, and their projections for the future.
It’s also important to scrutinise their team – both management and normal staff – as their skills and input will be just as valuable as the physical assets you’re acquiring.
Finally, don’t miss out on the opportunity to learn from the seller themselves. If it’s possible, spend some time with them during the M&A process and pick their brains on how the business runs and how you can make it grow.
4. Prioritise a smooth transition
As you may expect, the transition period from one owner to the next has the potential to be a little bumpy. If handled poorly, it could even result in the loss of valuable employees, suppliers and/or customers. That’s why it’s so important to focus on integrating your new business and getting off to a positive start. To accomplish this, you need to implement an effective system of communication, keep tabs on employee engagement, and make sure everyone understands their new role.
Why hire a business broker?
Because cross-sector acquisitions tend to be risky and complex to navigate, it can help to have an experienced M&A advisor by your side from day one.
Business brokers in the UK specialise in helping both buyers and sellers find the ideal candidates for a profitable deal. Once they have done that, they then oversee every stage of the M&A process, from valuing and marketing businesses for sale through to assisting with negotiations.
Drawing on years of expertise, they are well-versed in guiding every merger or acquisition from first contact all the way to completion. Along the way, they can offer invaluable advice on how to give every transaction the best chance of success. Finally, they can use their vast network of contacts to put you in touch with industry specialists.
In short, with a tried-and-trusted business broker by your side, you can remove a lot of the stress and uncertainty from the acquisition process.
Final thoughts
Are you determined to go ahead with a cross-industry acquisition? If so, why not give our friendly and highly experienced team a call and find out how we can help? We have plenty of experience in managing acquisitions from start to finish, and we can promise a results-driven, bespoke, and dedicated service. Not only that, but you can benefit from our exclusive Acquisition Finder pilot, which includes a 30-day money-back guarantee for your total peace of mind.
To learn more, give us a ring on 01926 757100 or send a query to Hello@harrisacquire.com.
