fedcap comments

Growing your business by acquisition, worth considering?

The answer of course is “maybe” and “it depends”, it’s almost certainly something you should at least be considering as an option even if you choose to rule it out for now.

The first and most obvious questions you should ask is how well is your business travelling now and what are your ambitions for growth. While there are sometimes good reasons for a poorly performing business to buy another, they’re relatively rare and you’d need to be very sure about the strategy you're employing.

So if the business is going well but you want to grow it faster or bigger, maybe to take advantage of economies of scale, consolidation opportunities, economic circumstances or to prepare for an exit, then it’s probably worth considering. The next question is how to go about it.

For many business owners acquisitions are just opportunistic, they’ll look at opportunities if and when they arise but it’s not a core part of their growth strategy. And that’s fine but it means of course they only see what comes across their desks and there’s no real strategy in what they see. It also means they’re unlikely to develop the skills in-house to properly assess, negotiate and integrate any deals they might do – so the risk is higher.

The alternative, and it’s not for everyone, is to make acquisitions a core part of the growth strategy.  You wouldn’t decide to make a key staff hire and then just sit back hoping the right person will walk into your office, but that’s what many business owners do when it comes to acquisitions.

If you decide to make it part of your strategy this means consciously thinking about and deciding what type of acquisitions would add most value to your business, then researching the market to identify potential targets that meet your criteria before actively starting discussions with them. It also means developing some capability around you, whether through experienced advisors or in-house staff.

Making and integrating successful acquisitions is a very different skill from operating a business. It’s crucial to remember that most acquisitions succeed or fail in the integration stage, in other words after the deal has actually been completed. Whilst it’s vital to identify the right target and structure and execute the deal properly, it’s the phase afterwards that probably matters most. Your plan for the first 100 days after completion should be on your mind from the very outset. 

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