How do you grow your business through acquisition
If you are serious about your business growth, making mergers and acquisitions a primary focus of the growth strategy can be a way to achieve your targets. Many companies reach a plateau where external factors like the sector they operate in, economic factors (such as a recession), the market size, and competition in the market limit their growth. Internal factors like the ability to recruit talent, skills shortages, limited time, management limitations, outdated production facilities, etc., can also affect change.
Many sectors, like technology, food production & delivery, engineering, etc, continue to overgrow. If you are already operating in these areas, effective acquisition management can allow you to increase market share with speed.
Top 7 ways in which M&A drives growth
There are several ways in which acquisitions can aid business growth. The top 7 ways of using mergers and acquisitions as a growth strategy include:
1. Diversify products and services
If your product or service offerings have a gap between them, or you want to spread risk through diversification, then a company acquisition that offers these products or services currently can be easier than developing those products or services from scratch.
2. Increase market share
Acquisition is the quickest way to gain market share compared to a slower organic strategy. This acquisition strategy can increase market share and is particularly useful in the banking, accountancy, and technology sectors.
3. Access to new markets
It is easier to break into new markets with a significant upfront investment. A strategic acquisition management strategy to buy companies can save time, effort, and money. This can be effective while trying to break into international markets. It is often easier to acquire a local business in the country you wish to trade and then take it up.
4. Access to funds and assets
Buying another company will allow you to access better production or distribution facilities. It is less expensive and quicker to buy rather than build.
Now that it’s a combined company, your acquisition could increase the available capital after the purchase.
5. Spread risk
Mergers and acquisition allows businesses to spread risk across various revenue streams. It eases the process of diversifying products and services. Multiple revenue streams ensure convenient operations even if one revenue stream is reduced. This helps a company to sustain itself in the longer term.
6. Reduce & rationalise overheads
When acquiring another company, a significant edge can be reducing overhead costs/operating costs. It allows businesses to gain economies and improve margins and cash flow.
You can reduce costs and achieve better bargaining power with suppliers or distributors. By achieving cost synergies, owners make the acquiring company and the acquirer more profitable.
If this is your acquisition goal, targeting companies with lower margins is best. It’s easier to improve the performance of these companies.
7. Driving growth through a clear acquisition strategy
- Customer Base Expansion:
Acquiring businesses can rapidly increase your customer base. It will boost revenue and market reach.
- Innovation Injection:
Controlling innovative startups or firms with efficient acquisition management strategies can infuse fresh ideas and capabilities into your company.
- Competitive Advantage:
Strategic acquisitions can provide a competitive edge and secure critical assets, patents, or intellectual property.
- Speed to Market:
Acquiring companies can expedite your entry into new markets. It will help you grab opportunities faster.
- Global Reach:
Acquiring international companies can expand your global presence. Take advantage of new growth opportunities.
Why create a business acquisition team?
First, to ensure you drive growth through acquisition, see if you have the suitable capacity to manage the acquisition. It is essential during the buying process and after the acquisition is completed.
Buying a business can take your focus off your core business and day-to-day operations. The deal process takes time, but managing daily business operations is equally necessary. It is when you can hire a professional team to take up the acquisition and contract management part.
The key to smooth operations is to have the right internal resources to manage the acquisition and post-acquisition integration.
The Bottom Line
Outsourcing your acquisition and contract management team can boost efficiency and cut costs. You can ensure compliance, reduce risks, and streamline your procurement processes by relying on specialised expertise. What next? Hire a team of trained and certified professionals from Nomadux. Let a skilled team look after the acquisition process for you to focus on core business!
