August 10, 2022

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GROWTH BY ACQUISITION: WHY EMBARK ON THE PATH OF EXTERNAL GROWTH?

GROWTH BY ACQUISITION WHY EMBARK ON THE PATH OF EXTERNAL GROWTH

For a company, there are many advantages to developing externally through acquisition. Whether in place of internal (so-called organic) growth. It is (in most cases) in addition to and alongside this one. An acquisition is not limited to a one-time opportunity. There are reasons to increase its turnover and the richness of its offer. But represents a potential tool. Forcing the value of the company and sustainable growth.

Internal growth or external growth?

But it is precisely the constraints and side effects of the acquisition process. It makes some companies wary of making m & a services a meaningful part of their growth strategy. Large and sudden upheavals can easily destabilize a business, and such transactions inevitably involve considerable financial risk. Therefore, especially in the case of SMEs, integrating an acquisition process. into the company’s growth strategy often seems far.

This is unfortunate because, if properly understood and designed, an acquisition strategy is not only a good way to gain size. But also to significantly increase a company’s value proposition (expertise, services, products, international presence, internal processes, leadership. To finally complete and amplify the main growth strategy which is often organic.

Alignment with the company’s organic growth strategy

Align with the business model

First, as already indicated, it should be noted that pro-active mergers and acquisitions consulting. the process is optimal when it is complementary to a well-defined internal growth strategy. A strong and successful business model contributes to a safe acquisition strategy in two ways. First, it ensures the good health of the company’s main activities. This means that any acquisition made will add to an entity that is already financially stable and commercially mature. Doing the opposite (by associating a healthy and flourishing business with a static or struggling business. Whose business model fails) will not save the main company. Moreover, it is even rather the opposite that is likely to occur, ultimately placing the two companies.

Solid foundations

Second, initial discussions and negotiations are much more likely to succeed when the acquirer can demonstrate solid and lasting performance. The results of a proven business model; very attractive for sellers, signal to them a potential partner/buyer capable. Even improving their business once they hand over the keys to it. Due diligence, whatever its form, is a process that often works both ways.

A strategy for accelerated value growth

Moreover, if this organic growth strategy makes it possible to strengthen the business case of an acquisition. Demonstrate how the acquired company will benefit from the strategy of the buyer. And will therefore succeed in achieving its growth and profitability objectives. This is a very strong signal indicating that internal growth and M&A strategies are well aligned.

How can an acquisition strategy contribute to organic growth?

Acquisitions, when carefully planned, can complement, and accelerate the acquiring company’s overall growth strategy in several ways. Depending on the sector, the imperatives will sometimes be different (for example, the need to acquire a company with very specific accreditations. Having framework agreements with certain major contractors, etc.) but, generally, how an acquisition process can support a comprehensive internal growth.

Acquisition to increase market share

Acquiring a business to increase market share, whether in a strategic industry or geography, is one of the most obvious. Ways in which an acquisition process can drive organic growth. In some markets (particularly those with low growth rates, or those with low competition. The acquisition of market share can significantly improve a company’s competitiveness (economies of scale. Bargaining power in face of a purchasing department, ability to impose its price grid, etc.).

Acquisition to add complementary products and/or services to the existing portfolio

Adding new products or services to an acquiring company’s portfolio can provide existing customers. With a wider range of solutions and increased average contract value. This enriched portfolio also makes it possible to approach larger and more demanding customers. The benefits here are not just financial: you benefit from an increased rate of penetration of your market. Stronger relationships with important or strategic customers.

Acquisition to develop new geographic markets

In our increasingly integrated economic environment, the macroeconomic fundamentals and growth drivers are often identical in similar types of economies. This means that a thriving market in one country is likely to provide good business opportunities in another. Obstacles vary by country/region and are often legal, cultural, or fiscal.

Consequently, a well-known market could well be just as, or even more, attractive in a neighboring country. But projecting yourself there without already having a foothold there is complicated, and often requires patience and investment. An acquisition process will serve as a gateway for a company, offering it a presence in a new territory and allowing. It sells or distributes its services or products using the acquired company as an intermediary.

Acquisition for diversification purposes

Whatever the success of a company and the solidity of its business model. It will one day be exposed to market reversals (and this, in a cyclical way, or the form of structural transformations). Consequently, a company will anticipate such situations and will consolidate its position by diversifying its offer and will target new. But ideally complementary markets and customers. Niche acquisitions (even of very small companies) can sometimes represent the “missing piece” of the puzzle for a company. In terms of developing a new product or service; a missing piece will allow a company to quickly diversify and build resilience.

Conclusion

The acquisition process can be a daunting prospect, but it becomes significantly more tempting. When integrated into an internal/organic growth strategy. Even for SMEs, this acquisition process significantly strengthens operations and value proposition. It can be accomplished with outside professional assistance to help them manage any resource or experience gaps. Such assistance is offered by Freeman Logan which helps many SMEs and ETIs to understand. How an acquisition process prepares and adapts to all your company’s activities, to its growth strategy. And helps you to execute your growth projects by acquisition in the United States.

In conclusion, acquisitions must complement and amplify the growth trajectory of the acquiring company.