In his three-part series, Build or Buy? Equiteq’s Adam Blatchford discusses the pillars for successful growth through acquisition. Adam begins by addressing the fundamental question: Should you acquire?
As a shareholder, you have set goals, both personally and for your firm.
Those goals may include building enough equity value to retire, start a new venture, or support your family; everyone is different, but most owners have a timescale and an amount in mind.
Acquisition could help you achieve those shareholder goals; it can add value to your firm if it is carefully and clearly aligned to your overall business strategy.
Acquisition is not a strategy in itself, it is a means which can be used to deliver the strategic needs of your business plan. First your strategy must be aligned to your shareholder goals, then you can consider if acquisition is the right way to accomplish that strategy.
There are right and wrong ways to grow through acquisition; you want to be scaling smart, ensuring business growth translates into equity value growth by avoiding mistakes and missteps, so that you can deliver your business plan and create value in your firm. The best way to do this is to view your firm through the eyes of a buyer, considering how the shape of firm you are building will be attractive to a future investor.
There are a number of ways that acquisition can be valuable to deliver your strategic needs and to simultaneously build value to a potential buyer.
A strategic imperative for consulting business owners is having a tangible differentiation from competitors. Acquiring a firm with a specialist IP offers this differentiation from competitors at a significantly faster rate than R&D.
Similarly, business owners can access strategically valuable clients by acquiring a firm with a specific procurement framework/certification. Such an acquisition can overcome barriers which block the efforts of a sales and marketing approach, for example closed procurement frameworks, industry/government requirements for certifications, or simply entrenched provider relationships.
Acquisition is also an attractive route if there is the opportunity to acquire a complementary offering with sustainable cross-selling opportunities. As well as immediate revenues from selling your services into their clients and vice-versa, you can build equity value by delivering sustainable growth beyond what each firm could have achieved alone. By combining two complementary offerings into a single focused proposition, you can continue to unlock opportunities in new clients and drive future growth.
If aligned carefully with your business strategy, acquisition can be the best route to smart scaling your business. It can add unique offerings, open up new markets and draw in new clients. As a seller, you should ensure that any acquisition will build equity value and sellability by considering the strategic rationale through the eyes of a buyer.
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