Strategic Growth Acquisitions

There are essentially two different ways to grow a business. One is through organic growth that takes place as a business contracts more work, draws in new customers, hires more employees, and buys more equipment. The other comes as a company acquires an existing business and brings on that company’s customers, employees, and equipment. A few different companies we have been working with are illustrating future growth through both organic and acquisition growth strategies.

I personally believe that acquisition is a great strategy for growing a business. It allows businesses to take a significant portion of that market share almost over night as both parties sign the letter of intent. It is important, however, that the company finds the right target. When an acquisition is being considered it is important to consider both the quantitative and qualitative aspects.

Starting with the quantitative side, is the company going to be profitable? Will it continue to be profitable after the acquisition? What overhead expenses are currently being born that will not be in existence when we incorporate the company into our infrastructure? These are all questions that need to be considered.

On the qualitative aspect, it is important to consider the business model of the company. What is its current direction? Will that direction fit with our direction, or will it take significant effort to integrate the two together? What is the attitude of the management? Will the key management team push against our goals or will they help to implement them into the acquired company? Will we need to replace any of the employees or will those running the company want to leave after the acquisition? If so, who will we put over the company in their place? These questions along with countless others are important to consider.

Although it is sometimes and often challenging, acquiring a company is a great strategy. It is part of the approach the technological giant, Google, as taken over and over again to build the market present it has. The strategic acquisition approach is why Google even started looking into Motorola, because it was a way to acquire space in the phone building industry to compete with the even bigger giant, Apple. Whether you are a grocery store expanding to a new city, a tech company expanding your market presence, or a construction company looking to take on new capabilities making an acquisition could be the way to go. We recommend that you contact us to represent your company in the next business development approach you are pursuing.

One business owner said that he is interested in acquiring a company but he is not interested in spending the money to hire a banker to find the right acquisition target. Although he will save some money in his search, he may struggle to find a company that will fit well into his business model. When you hire a banker we outline the right fit and we find the companies that will work. The choice you need to make is how passive or aggressive will you be in finding the right company.

Carl Christensen
Carl Christensen is a Principal with Deal Capital Partners, LLC and InvestmentBank.com. Before joining InvestmentBank.com Carl served as CFO for a $50M consumer events company. He is a former employee of both Goldman Sachs and Deloitte. He brings both breadth and depth to the M&A advisory team here at InvestmentBank.com.
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