Of all the growth strategies that businesses look to implement, a well-planned acquisition is one of the most effective.
Unfortunately, the reverse is also true. An ill-advised acquisition can cost your business dearly, setting it back years.
We asked Rick Smith, founder and MD of business acquisition specialists, Forbes Burton for some of the main things to look out for when it comes to buying the right business.
Does the business align with your growth plans?
It’s one thing saying that you’d like your business to grow.
We all do.
The important aspect to explore is how you’d like your business to grow. Once you’ve identified this, you can start to narrow down your shortlist of targets more effectively. Here are some of the more common growth strategies that businesses use acquisitions to achieve.
Geographical expansion
If your business is dependent on nearby clients, it can quickly plateau when it exhausts the local market.
The most obvious route to growth from there is to start tackling different geographical areas. While creating a fresh branch elsewhere is always an option, it can be difficult to start from scratch with no clients.
This is where a shrewd acquisition can work wonders. Not only does it allow you to gain a foothold in a new area, but it also provides you with a ready-made client base.
To really make this strategy work, you need to find a target company that offers a very similar service to your own. Taking over a business that’s too far away from your core offerings makes little sense: you’ll have paid for their existing client book, but those clients will probably look elsewhere if you don’t offer what they want.
Service/product expansion
If your business isn’t reliant on local custom, you may decide that expanding your service offerings might be more fruitful.
This can allow you to both reach new clients and extract more value from existing clients.
Tech companies are particularly adept at this. Think about some of Google’s acquisitions over the years: YouTube gave them a footing in video streaming, while purchasing Deepmind has proved instrumental in the development of their AI services. Meta’s acquisition of Oculus meanwhile, allowed them to delve into VR, while Amazon’s canny addition of several small electronics firms allowed the former online bookshop to start manufacturing their own tablets and smart home devices.
Obtaining IPs, talent, or other assets
Some assets can be a gamechanger for businesses. Prior to Disney launching its own streaming service, for example, it was smart enough to acquire the rights to Marvel and Star Wars franchises to bulk out its offerings.
It’s not just huge multinationals that find value in IPs though. SMEs can find them just as helpful.
If there are geographical permits or patents that give a company exclusive rights to a particular product or branding in one or more areas, these can be very valuable to small businesses. Buying out a company that holds such rights can provide a huge boost to your own business.
It may be that you’re interested in the proprietary technology a competitor uses or find it difficult to source skilled staff such as those employed by a rival. Either way, an acquisition can provide you with these as part of any deal.
Get expert help on board
Beyond the initial choice of business you intend to acquire, there’s a whole host of due diligence checks that need to be undertaken. A good M&A advisory service will take care of these issues for you to ensure that you’re not left with any nasty surprises.
Forbes Burton have specialists on hand that can help you to acquire the perfect business to aid your company’s growth. Find out more about their acquisition services on their website.