Part 1 – What is your strategic reasoning for acquiring a business?
Why you want to buy a business, where to search and what to look out for.
To start with, it helps to be clear about why you are buying. Acquirers can have diverse motivations:
- a carefully thought out strategy
- opportunistic e.g. see a competitor of a failing business is up for sale
- a belief that, by acquiring, you will be able to generate a value significantly greater and faster than the alternative of continuing organic growth.
Often, the expected benefits will include one or more from:
- geographic expansion
- customer base
- customer spread, i.e. for a manufacturer a number of blue-chip customers, such that there is no undue reliance on a small number of customers
- contract durations
- repeat business patterns
- intellectual property rights
- depth and quality of management
- uniqueness and competitiveness of products and services
- scalability of products and/or services
- market position and brand
- systems and processes, particularly relating to winning new business
- quality of service
- the “halo” effect, the extra revenues and profits that can be gained from e.g. cross selling to one another’s customers or improved supply etc
- to build the business in advance of selling it.
For each of these, the key question is – “what would it cost and how long would it take to add these (the “extra” criteria that you have that means something to us) to our own business ourselves, organically?” The right Acquirer, for whom the Seller provides the most amount of value, may well be persuaded to share some of the value with the Seller and reflect that in the purchase price.
What LGBA/HCBA Acquisition Planning advisors can do to assist your business. Real life experience, strategic advice and tactical support.
- Develop the value enhancing strategy
- Action-focused Business Planning
- Assistance with what follows next – a Business Support Programme to help you implement and deliver the plans
- Fund raising and acquisitions assistance
Next month I’ll share my top tips on searching for a new business to acquire. Please feel free to get in touch with me at firstname.lastname@example.org or on 07904 766230 if you’d like to find out more.