Astute M&A Strategies
M&A strategy for a firm can be a highly successful way to create value and success. In order to maximise the chances of success it is necessary to have a clear strategy for the process, as opposed to simply acquiring firms to expand. Below are some strategies company shareholders and management should consider;
Vertical movement strategies are when a firm acquires another firm up or down its supply chain. The benefits of this strategy can be seen through easily controlling the level of supply to meet the dynamic needs of the firm, removing the negotiation process, and ensuring a reduction in fees making the firm’s processes more customised, cost-effective and efficient.
Geographic roll-ups occur when a firm completes a horizontal strategy and acquires a large number of firms across a geographical location to become the dominant force in the region. For a Sydney based firm this may involve either acquiring a range of competitors in Sydney, or in each major city across Australia to have a national presence. Coates Hire successfully used this strategy across every city to then dominate Australia and it has likewise been a successful strategy for a number of dental firms across the country. It generally has the most success when acquiring smaller firms.
Product & Geographic Extension
Firms utilise this strategy often to enter new markets, with a level of control. By undertaking this strategy when entering new markets, firm’s managers are better able to navigate the new markets and develop closer ties in new regions and markets that would be significant more problematic if done through organic growth.
Acquisition of Technology and R&D
Often firms have contracts with research and development teams to create new more efficient technologies and business processes. This can lead to problems with rivals, not gaining a competitive advantage from innovations, and not having the necessary input into innovations to make them uniquely successful. Firms acquiring for research and development have control over the process and will gain the intellectual property rights to ensure they gain an advantage from the process. This practice is becoming common place with larger finance firms regularly investing in smaller fintech firms to access and mould appropriate innovations.
When a dominant figure is gaining and taking market share similar smaller firms may merge or acquire other firms to ensure they can gain a market presence that can’t easily be taken by the dominant player. Examples of this being successful would be rival firms sharing a local geographical area such as Sydney but sharing a common threat from a large overseas player and joining forces to try and ensure the larger firm doesn’t try to come and overtake the market share. This can be successful as larger international firms will move into markets that are more easily penetrable with a low industry concentration.
Find Out More
Quinn M&A’s expert team of business transaction advisors can assist you to with all of your business acquisition, divestment, and valuation 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.