Organic is not fast enough, acquisitions

If organic growth is too slow or just not the right choice, what are your other options?  Acquisition, partnership, or maybe a joint venture could be the answer.  The actual structure or vehicle will vary in each case but where do you start?  So where do you turn, a broker, friends, lawyers, accountants, bankers or others?  However, the real question is what is the best way?

So the first step is to decide on whether you look horizontally or vertically.  Do you need a supplier or customer?  Which direction provides the most opportunity for growth either in size or speed to the next level?  What is the cost, timing and strength of each?  Are there particular synergies that are available in one direction vs. the other?  What about connections you may have that could help facilitate the move or possible some expertise advantage you may have?  Once you have walked through the intellectual aspect of this process, it is time to quantify the choices.  Hopefully you have trimmed it down to the two best choices and thus you can develop forecast that show the potential revenue gains, costs associate with the ongoing business (sales, marketing, operating and admin costs) to calculate the ongoing business improvement and then you can determine the acquisition cost and the time it takes to return that cost back to you.  It should be apparent at this point what the best choice is.  They usually are not that close but if they are maybe it means that you need to move in both directions if the resources are available.

This is a simplified overview of the acquisition option as there are so many factors at each step that make it much more complicated in fact vs. discussion.  The key here is to go through the thought process, lay out your options and the pluses and minuses of each.  From that you can zero in on that which makes sense for your company, culture and personality.  As you need to stay focused on your existing business, it is usually best to hire someone to manage this process under your direct supervision and with a clear mission and parameters.  In the next session, we will take a look at where do you find these prospects.

 

One response to “Organic is not fast enough, acquisitions

  1. Reblogged this on Balaji TS' world-view of telecom and commented:
    My own journey in the process of acquisition has been for slightly more than a year. However, I have been involved in identifying partners, understanding synergies with other companies and aligning with third parties to meet our own strategic goals almost as a life long activity – with the exception of a few years in between.

    So, I would add a preamble to this reblog – one does not wake up one fine morning and decide to start the intellectual process for acquisition. It takes experience. Get that experience established in your organization as a first step.

    Now you may continue with the reblogged article…

    Like

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