Mergers And Acquisitions For Small Business Growth
Posted on 21st November 2022
Have you considered acquiring another company to grow your business or merging with a competitor or complementary business?
Mergers and acquisitions (M&As) can allow you to operate more efficiently, access new markets, or acquire new expertise, products and knowledge. One or both companies involved could also benefit from enhanced reputation and credibility.
The idea has been popular in the professional services sector for many years, but almost any business could benefit from a well-planned M&A strategy.
Growing your business
Of course, you could simply grow your business organically, but there are times when the cost of a strategic M&A approach is well worth it because of the advantages it will provide. These might include:
Filling gaps – changes in your market sector such as new laws and regulations can mean that you urgently need additional skills or expertise. We all learnt a lot following Brexit, for example.
Access to clients – if you want to access a new group of clients one option is to join forces with a company that already has an established reputation and customer base. It might be more cost-effective that directly competing with them in the same sector.
Acquiring talent and knowledge – when you need expert knowledge in cybersecurity, accounting, or engineering, for example, acquiring or merging with a company that already has the intellectual property (IP) you need could be a fast and practical solution.
Shared interests – you could simplify and streamline your business by working with a company in the same sector rather than competing with it. You could save money by cutting back on duplicated effort and improve your negotiating power with a larger combined budget. You might even be able to increase prices because customers have less choiceand sell more complementary products or services.
Restructuring – joining forces with another company allows you to change how you do things. This can range from how your pricing structure works to how you pay your employees. You could add new products or services to your offer with the benefit of new expertise. You might also dispose of additional property or equipment that’s no longer needed.
Challenges in mergers and acquisitions
While there are some attractive aspects to an M&A strategy it might not suit every type of business.
Business culture – every business will have a different culture so the importance of assessing whether another company is a good fit shouldn’t be underestimated. Taking a careful look at policies, procedures and employee terms and conditions is an essential part of the process.
Brand identity – your business will have its own unique identity so some compromises will be needed when merging or acquiring another company. The process must include a conscious effort to define and build a new brand or risk losing the customers and employees you value.
Integration – it can be time-consuming to make two separate sets of systems and processes work together effectively. There will be costs associated with integration and training and members of your senior management team could become too involved, distracting them from other important business issues.
Marketing – existing loyal customers could become confused and new customers might not trust a newly merged organisation. Both internal and external communication and marketing will be important considerations to provide consistency and clarity.
If you are considering a merger or acquisition and would like some help with your financial planning please get in touch.
Tagged as: Business Finance, Growing your business, Marketing, Mergers And Acquisitions, Talent and knowledge
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