Today, you’ll see some new branding on our blog. We’ve renamed it The Acquirer to reflect the new emphasis on topics related to acquisitions. However, for the foreseeable future we will continue to post operator tips related to building your business organically.
These operator tips will definitely continue to focus on actions that help you scale your business safely building shareholder value in the long term.
10 Big Benefits of Acquisitions
If you are the leader of a Private Equity backed company or the leader of a public group, you know you need to close deals. Organic growth alone is just too slow! Of course, not any deal will do. Clearly acquisitions are only a tool to execute your strategy. We also know that research over the last 20 years concludes that we fail approximately 70% to 90% of the time. Why do we continue to chase growth by acquisition? A reminder:
- Faster execution of your strategic plan.
- An opportunity to achieve improved margins.
- Ability to gain a larger share of your customer’s wallet.
- Add capabilities you know your key customers need.
- Enable you to be closer physically to key customers.
- Dilute the dependency on a limited number of customers.
- Dilute the dependency on legacy products/services.
- Access to attractive new sectors where your credibility is weak.
- Access to fresh new talent.
- Career progression for your employees.
To achieve these benefits will require a specific mindset. The management team need to look through the lens of an operator and imagine the post-acquisition plan. The earlier the team consider the post-acquisition plan the higher the probability of success.
Not all these benefits will accrue from every deal but to achieve any of these benefits requires a process that stress tests the achievability of success throughout the process as facts are gathered. Here are a few examples.
- By setting out your deal objectives for each acquisition program, the team can fine tune the research criteria that defines your shopping list (Acquisition Profile). Remember you want to buy what you want to buy not what’s up for sale.
- Because you’ve thought through the story for each shortlisted target, you are able to ask better questions and gain insights into the fit of the target much quicker.
- The seller will feel that you’ve done your homework as you engage in meetings. Instead of avoiding the key question on the seller’s mind – how will you run our business under your ownership? – you are comfortable exploring that issue because you’ve rehearsed it internally.
- Because you’ve matched the needs of your customers with the capabilities of the key targets, you are able to imagine expanding the seller’s business. You have specific case studies that are worth exploring as you get to know the target better.
- As operators who understand your own product road map, it’s possible to explore how the target’s products and services enhance your offerings.
- As a successful business you have expanded into many sectors but have failed in the past to break into the Biotech sector (or fill in the blank) because of credentials, accreditations or skill sets. These shortlisted targets offer you an opportunity to quantum leap your growth, but can you manage them? Is there a different culture required to successfully grow these types of businesses? How does that affect your approach to human capital, to deal structure and to your post-acquisition plan?
In summary, to successfully capture the benefits of acquisitions requires a disciplined, systematic process that demands an investment thesis up front and tests that thesis with hard facts throughout the acquisition process. It achieves this by placing post-acquisition planning to the top of the agenda.
Would you like a discussion on your existing acquisition process?
We are always ready to open up a dialogue. Ian@TPPBoston.com or Kevin@TPPBoston.com
We are buy-side investment banking reimagined. It’s fractional corporate development management through the lens of an operator. We seamlessly become an extension of your team and integrate at all levels to add deep mergers & acquisitions expertise into your business. We build a system that finds, acquires, and integrates attractive targets. It transforms your ability to scale by acquisition.