How a Business Acquisition Can Provide Quick Growth Opportunities

How a Business Acquisition Can Provide Quick Growth Opportunities

In today’s difficult economic landscape, many small businesses are struggling to keep their heads above water. Even those in a more comfortable position haven’t found themselves unscathed either. Research compiled by Enterprise Nation found that UK companies are delaying their plans for growth while the economic future remains so uncertain. Their findings showed that there had been a 26% drop in businesses looking to secure capital up to £10,000 through business acquisition.

Rick Smith, Managing Director of business consultancy, Forbes Burton, thinks this nervousness could actually be the driver behind an upturn in M&As. He suggested that “any businesses that do decide to invest time and resources into their growth strategies right now are looking for the lowest-risk methods possible. That’s why the number of worldwide mergers and acquisitions are projected to increase this year as companies seek to stabilise their position in the market”.

A well-planned acquisition can provide extra stability by combining the resources of both companies to become one stronger entity. That’s not the only benefit to pursuing an acquisition though. While stability in the current commercial circumstances is understandably sought after, there are a number of other reasons why an acquisition might be the best growth strategy for your business.

Why is Business Acquisition the Best Growth Strategy?

Taking Competitors Out of the Equation

Trading conditions are tricky enough without rivals vying for the same clients. While expanding via normal circumstances (i.e. securing extra premises) can increase the presence of your company, it doesn’t necessarily equate to a bigger market share. By taking over a competitor, you not only grow your own business, but you also snuff out the threat of another in the process.

Make Instant Returns on Your Investment

While the building of an extra premises can require some time to establish its own client base, an acquired competitor will likely have their own that you can take on. As long as the purchased business was running right up to the transfer of ownership, you’ll be able to carry on trading as normal and making money to offset the acquisition.

Beneficial Contracts

If you’re looking to acquire a business that’s been established for some time, you may find that it holds some value in the contracts it holds. Longstanding agreements are likely to be far more competitively priced than any new contracts you can arrange.

Take advantage of any strong relationships the acquired company may have with suppliers and other services. There may be scope for extending these deals to include the purchasing company too.

Business Acquisition is Quick & Easy

Of course, the purchasing of something so complex as another business isn’t necessarily simple, but it can certainly make some aspects easier. For example, all the work required to build a customer base has already been done. The marketing needed to alert customers of your presence has probably already been conducted too. Building a business from scratch is very difficult, and establishing a new branch or premises can be almost as tough. 

By utilising what the acquired company already has, you speed up the process exponentially. In fact, you may find that operations are close to where you’d like them to be almost instantly.

Business Acquisition = Automatically Trained Staff

Any new hires carry with them a lot of cost to a business. First of all, the recruitment process itself can incur some large fees. This cost doesn’t cease once the hiring has been decided upon, however. While you wait for the new recruit to become au fait with both the job and the company, you’re practically paying them to be trained.

An acquisition will see you take on all of the purchased company’s staff, which means that you won’t need to enlist the help of expensive agencies or wait for them to become skilled at their job. This is particularly beneficial for industries in which there’s a paucity of skilled workers.

Access More Funding

As a larger business, lenders are happier to provide a wider range of financing options to you. You may be entitled to better rates and access to lenders that previously wouldn’t entertain your company as a viable customer. This could make it easier to fund other acquisitions down the line.

On the other side of the fence, those businesses being acquired may find that such an outcome is welcome. Business owners are understandably worried about their companies’ futures, and a takeover may well represent an attractive exit strategy for many.

Directors of purchased companies are often kept on by their new paymasters. Their knowledge of the purchased business, its contracts and staff are invaluable to risk-averse purchasers, and is often sought after. Some directors are even offered share options to ensure their experience is not lost.

With mergers and acquisitions making sense for both sides in the current climate, we could well see a surge of interest in such methods play out over the course of the year. It’s certainly a safer method of expanding than investing in a new premises, but those interested in acquiring a business would be well-served to enlist the help of a business acquisition service to help them secure the right business.

Forbes Burton offer advisory and consulting services to small to medium sized businesses across a range of industries and sectors.