Organically expanding your customer base and product or service lines and acquiring other companies are the two main ways to grow a business, and both approaches have their advantages and disadvantages.
While organic expansion is steadier and less risky, it is also slower; acquiring new companies is faster, but it doesn’t always work as planned. If you want to make the latter strategy work, you need to know how exactly business acquisition helps you expand, and understand how to leverage expansion to maximize returns.
If you want to expand your business in the coming year and you think acquisitions could be one way to do so, here are four main examples of the many ways acquisitions can create growth.
1. Reduction of Inefficiencies
When you acquire a new business, you may be able fold their sales, marketing, design, and human resources departments into your own. This means that your company continues to receive the revenue generated by your acquisition, but you have an opportunity to trim the fat and create a leaner, more profitable operation, as you can make small, strategic cuts as necessary.
Similarly, acquiring a new company may give you an opportunity to restructure parts of your current business, which can be a great way to reduce overhead and reinvigorate your office culture.
2. Expansion into New Markets
Sometimes an acquisition doesn’t simply help solidify your position in the existing market, but also gives you a chance to get a foothold in new markets.
While this can be one of the most rewarding types of acquisition, it is also one of the riskiest — success almost always hinges on finding companies that complement not only your existing areas of expertise, but also have a similar corporate culture.
If your company values a sense of hierarchy and order, it may not be a good idea to acquire a start-up that prizes an unorthodox workplace culture and a free flow of information and ideas. A clash of corporate cultures can be even further exacerbated in the case of international mergers and acquisitions.
This is why many businesses expanding through acquisitions choose to work with a mergers and acquisitions advisory brokerage to help them identify companies with whom they would have good synergy.
3. Deepening of Market Share
When you first start out, your main goal as the new kid on the block is establishing your reputation and winning the trust of clients and customers while building up a team that has the skills and know-how to grow your brand.
But once you have achieved a level of success, the fastest way to expand can be through acquisitions and mergers of competitors. This helps you deepen market share while also expanding your team by bringing on people who know the industry, making it one of the most effective ways for mid-sized companies to achieve rapid growth without running into scaling problems.
Achieving sustained business growth is always a complex process, and one of the things that makes acquisitions so appealing is that they can help you reach the next stage more quickly. But this is a lot easier to do successfully when working with merger and acquisition brokers, so if you think an acquisition is right for you, make sure to consult with a professional team first.
