0203 95 404 95 enquiries@bf-consultancy.co.uk
There are many good reasons for growing your business through an acquisition or merger, and a couple that should be noted before any acquisition takes place.
 
 1. M&A IS A TACTIC TO EXECUTE STRATEGY. IT IS NOT THE STRATEGY ITSELF:

Companies need to have a clear, well-defined strategy for their specific business vertical. As part of this process, it needs to consider all possible alternatives: Build in-house, License, Partner, Co-invest, Acquire, etc., and come to the conclusion that a specific acquisition is the best way to go. For example if your business is underperforming and if you are struggling with regional or national growth it may well be less expensive to buy an existing business than to expand internally.

 

 

2. THERE ARE TWO PRIMARY MOTIVATIONS FOR COMPANIES TO MAKE ACQUISITIONS:

1) Fill a strategic gap in the company’s product, resources (people) and capabilities by obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence.  Organic growth can be accelerated – businesses in the same sector or location can combine resources to reduce costs, eliminate duplicated facilities or departments and increase revenue.
2) Help the company enter a new market, with diversification of the products, services and long-term prospects of your business – a target business may be able to offer you enhanced products or services which you can sell through your own distribution channels. Accessing a wider customer base and increasing your market share – your target business may have distribution channels and systems you can use for your own offers.

 

3. FINANCIALLY VIABILITY IS AS IMPORTANT AS STRATEGIC FIT:

It is critical for the deal to make financial sense.
Reducing your costs and overheads – through shared marketing budgets, increased purchasing power and lower costs.
Reducing competition – buying up new intellectual property, products or services may be cheaper than developing these yourself.
Accessing funds or valuable assets for new development – better production or distribution facilities are often less expensive to buy than to build. Look for target businesses that are only marginally profitable and have large unused capacity which can be bought at a small premium to net asset value.

4. KNOWING THE “VALUE DRIVERS” OF THE DEAL IS A CRITICAL ELEMENT TO SUCCESS:

The acquirer will spend a huge amount of due-diligence effort to identify the sources of value (Intellectual Property, People, Brand, etc) from the deal. It is essential for the acquirer to structure the deal and the resources to maximize these value drivers.

5. MORE THAN HALF OF ALL M&AS FAIL:

Research indicates that the failure rate (as measured by creation of post-merger financial value) is > 50%. Some obvious key reasons are: High valuations, lack of well understood value drivers, cultural misfit etc, so let us help you to be as sure as possible that any acquisition is the right acquisition.

6. EMPLOYEE TURNOVER IN TARGET COMPANIES IS USUALLY HIGH:

This is a concern in the years after the merger; hence the need for retention programmes for the key employees who drive the sources of value.