Growing By Acquisiton: A Key Factor That Drives Successful Acquisitions.
When targeting an acquisition it’s pretty easy to get lost in the numbers. After all, financial analysis is critical for acquisition financing, valuing the acquisition and seeing how the Company can add financial or enterprise value to the current business. When considering growing by acquisition, a harder question to assess is whether the acquisition is likely to successful in the long run. A study*(see link below) done by PriceWaterhouseCoopers found that those acquisitions that provided a capability or strategic fit created on average 14% more value than those that did not.
One way to assess strategic fit (and improve odds of success) is to ask… How will this potential acquisition help our current business? I find answers fall in two general buckets: it improves an area of our business that is lacking or it further enhances a Company’s core competency or strength. More specific things company owners have said include, “This acquisition…
- adds capabilities to better serve and sell to our current customers,
- provides a key employee skill set (sales, operations) that we don’t have,
- creates expanded roles for key executives and more opportunities for development,
- adds personnel that are in short supply in our region,
- creates a new service that is in line with where the market is going,
- allows us to test an acquisition growth strategy (roll up or diversification), or
- eliminates a competitor.”
So when analyzing your next acquisition remember to ask how the acquisition helps your current business. The answers to that question may help you better understand the strategic fit and thus improve your odds for long term success.
What Our Clients Say About Us…
Doug McReaken
COO, Media Riders, Houston TX
“Chris helped us look at many different types of financing alternatives and helped us find a new capital provider that increased our funding limits and released some of my personal collateral. As our business began to grow rapidly, Chris also helped us modify our financing terms with our new capital provider. Since that time, Chris has helped us evaluate acquisitions, set long term and short term financial goals and serve as an on-going financial advisor. I enjoy working with Chris and I trust that he and his team have my best interests at heart.”