5 Reasons to Grow Your Mature Business Through Acquisition
When successful firms reach the mature phase of the business life cycle organic growth becomes more difficult to attain. At this point an acquisition strategy can foster a high level of inorganic growth and open new windows and initiate change to ensure the future success of the business. Some of the ways an acquisition strategy can achieve this are outlined below.
Market Share
Sometimes an acquisition target can be sourced largely on their ability to provide customers and increase a company’s market share. Increasing market share can bring a number of advantages such as revenue synergies, reducing a company’s risk, and also enabling greater brand awareness, increasing the firms ability to generate sales and to attract new customers.
Talent
Talent is a key driving factor in generating business growth, innovation and maintaining a position ahead of competing and emerging firms. Combining the ideas of your firm and an acquired firm on similar tasks can result in significantly improved and more efficient processes. Acquiring talent similarly applies to acquiring innovative technology and intellectual property. Gaining exclusive use of a product or continued access to a team that creates innovative products has the potential to give your firm an exclusive competitive advantage.
Diversification
A conglomerate merger or acquisition can significantly reduce a firm’s exposure to its current market, and enable a broader range of opportunities. This successfully lowers the risk of the firm, increases its potential and ultimately increases its value. Further benefit may also be realised through cross-selling revenue synergies, enabling either firm to target new, previously untapped markets.
Economies of Scale
Larger firms can generate greater margins on products or services through higher sales prices and reduced costs. With regards to sales, a larger company will often have more prestige, and be perceived as more reliable than their smaller, less established competitors, giving them the power to charge a premium price for a similar product. Similarly when negotiating contracts for supplies per unit, their ability to generate a greater volume of business means they are often charged a lower price. Acquiring or merging with another company is a simple way in to these economies of scale.
Synergies
Synergies refer to situations when two or more firms combine to perform at a higher level than if they were to operate separately. Synergies are generally categorised as either revenue or cost synergies. Revenue synergies are more difficult to calculate, but can come about through the elimination of competition which can occur through acquiring a competitor. On the other hand cost synergies drive up profits as costs in areas where tasks may be duplicated in each firm such as administration functions can be reduced.
In conclusion, acquiring a competitor, a rival firm, or a talented team can significant assist in business growth and is a strategy considered by most successful business owners.
Find Out More
Quinn M&A’s expert team of business transaction advisors can assist you to with all of your business acquisition requirements. Contact Quinn M&A today on +612 9223 9166 or submit an Express Enquiry to arrange a confidential no cost consultation with one of our Senior Advisors.
