There are many advantages of growing your business through an acquisition or merger. These include:
- Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence. For instance, a business with good management and process systems will be useful to a buyer who wants to improve their own. Ideally, the business you choose should have systems that complement your own and that will adapt to running a larger business.
- Accessing funds or valuable assets for new development. Better production or distribution facilities are often less expensive to buy than to build. Look for target businesses that are only marginally profitable and have large unused capacity.
- Your business underperforming. For example, if you are struggling with regional or national growth it may well be less expensive to buy an existing business than to expand internally.
- Accessing a wider customer base and increasing your market share. Your target business may have distribution channels and systems you can use for your own offers.
- Diversification of the products, services and long-term prospects of your business. A target business may be able to offer you products or services which you can sell through your own distribution channels.
- Reducing your costs and overheads through shared marketing budgets, increased purchasing power and lower costs.
- Reducing competition. Buying up new intellectual property, products or services may be cheaper than developing these yourself.
- Organic growth, ie the existing business plan for growth, needs to be accelerated. Businesses in the same sector or location can combine resources to reduce costs, remove duplicated facilities or departments and increase revenue.
However, a merger or acquisition can also create its own problems. See what can go wrong with a merger or acquisition?