Growth through business acquisitionTo up-size your business, it pays to look outside of the square. Growing your business through business acquisition can be a much faster, safer, and cheaper option than increasing revenue organically.
One of the most effective and immediate ways to up-size your business is to buy
your competitor. This method can also be one of the most cost-effective ways of
growing your business and securing new customers. In addition to increasing
your customer base, there are also trained staff that understand the business
and its customers, systems, and potentially a new culture.
The decision to buy your competitor may be made for strategic reasons. You may have recognized a shift in the market and the smartest way to better position your business is to buy a company that will provide you with the technology, knowhow or the market advantage.
The alternative is to grow or move your business slowly over time, and with effort you can improve existing systems to increase sales thereby creating a larger, more profitable and valuable business.
There are many good reasons for growing your business through a business acquisition or merger. These benefits include:
- Acquisition of skilled and knowledgeable
- Increased purchasing power and lower costs
- Expanded customer base and market channels
- Better business intelligence, IP and systems
- Acquiring technology and competitive advantage
- Access to funding with added cash flow
Bear in mind that any business acquisition and merger should occur as part of a strategic plan, not just because it is available. You will need to identify long and short-term objectives, desired personal, strategic and operational goals. Develop a profile of the type of business that would best suit your needs; it can be a good idea to discuss your ideas at an early stage with your accountant and lawyer.
Once you have made the decision to acquire another business, the next step is to search the market for a business that is suitable and meets your criteria. Talk to industry specialists and search specialist Business for Sale listing websites. It can pay to engage an intermediary to initiate discussions especially if you are approaching competitors or companies within your supply chain.
When looking to purchase an existing business it is prudent to pull together an "acquisition team". This team should include your banker, accountant and lawyer. These advisors are important in helping get a good strategic fit and in reviewing and verifying all the relevant information about the business you are considering.
The company’s reputation and strengths of its business relationships also needs assessing. Talking to existing customers, suppliers and vendors about their relationship with the business can assist in building the companies’ profile.
If the business is promising after your preliminary analysis, your acquisition team should start examining the business’ fit, its potential returns and its asking price.
Re-check their strategic fit against your
criteria, and map how you would integrate this business with your current
operation. Study the balance sheets, income statements, cash flows and tax
returns as these are key indicators of a business’ ability. These documents
will help you highlight any underlying problems. You will also need to do cash
flow projections, map the potential benefits, and examine all key elements that
you have identified in your ideal business profile to see if it’s a good move
in building your business.
When purchasing any business always seek professional advice.
For AU Business for Sale Opportunities visit aubizbuysell.com.au
By Richard O'Brien - aubizbuysell
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