Has your company thought of expanding and potentially conducting a corporate acquisition, but been held back by uncertainty or inexperience? Acquisitions are one of the most common and fruitful expansion methods that many businesses use to achieve long-term goals, but if you’re still a relatively small company and you haven’t found any targets for acquisition yet, you may be feeling unsure about proceeding with your first acquisition. However, you can overcome those fears by equipping yourself with the basics of the acquisition process, and by finding the perfect company to extend an acquisition offer to. Check out these four handy rules of thumb that can help you or your top-level managers identify potential targets for your company’s first-ever business acquisition.
1. Search for Businesses That Contribute to Your Company’s Longer-Term Strategy
Although it may be tempting to reach out to a growing company and make a tentative acquisition offer, it’s important that all of your acquisitions play some role in the company’s longer-term strategy. Consult with your top business broker and look for businesses that could help with:
- Expansion into a certain niche market or new geographical zone
- Reduction of your current market competition
- Introduction of new products, goods, and services into the company
- Your ability to reach a desired company size goal
2. Opt To Acquire Fast-Growing Companies in Attractive, Booming Markets
If you’re looking for a relatively safe bet when it comes to acquisitions, search for fast-growing, hot companies is booming or up-and-coming markets. These companies have a number of unique advantages to offer. In particular, an already popular company may bring with it access to:
- A quickly growing new market or niche
- An innovative and booming new product or service
- A unique spin on the industry’s products
- A large and loyal existing customer base
3. Take the Business’s Culture and Mission Statement Into Consideration
When you acquire a different company, you take on existing structures and mores as well. That’s why it’s vital to take any company’s culture, mission statement, and code of conduct into consideration before making final offers or signing contracts. Research your target companies:
- Stated values
- Formal mission statement
- Charitable giving
- Workplace environment
- Corporate culture
4. Ensure You Can Handle the Size and Financial Implications of the Acquisition
One factor that some companies may underestimate when acquiring another business is that your company will need to be able to absorb the size and financial baggage of the other company. To ensure you’re truly prepared, ask yourself essential questions, including the following:
- Do you want to acquire a company of this size?
- Can your business successfully integrate a company of this size, or will you need to eliminate positions and reduce the size of the business in order for the acquisition to succeed?
- Can you afford to purchase this company at a fair market valuation?
- Will buying this business put your company into excessive debt or force you to cut costs elsewhere?
- Will buying this business ultimately increase the value of your company and its assets?
Before your business can dive into its first-ever corporate acquisition, you’ll have to learn the basic rules of thumb of the game. Whether you wish to acquire another business in the near future as part of your long-term growth strategy or whether you just want to be educated and prepared for when the time is right, these tips can help you understand how most acquisitions work, as well as some crucial questions to ask first. Finding a business that works for your company strategically, acquiring fast-growing companies in hot markets, taking a business’s culture and mission into consideration, and double-checking the growth and financial implications of the move can all be helpful pieces of advice. Keep them in the back of your mind before you move ahead with your company’s inaugural acquisition.
Mashum Mollah is a tech entrepreneur by profession and passionate blogger by heart. He is on a mission to help small businesses grow online. He shares his journey, insights and experiences in this blog. If you are an entrepreneur, digital marketing professional, or simply an info-holic, then this blog is for you. Follow him on Instagram, Twitter & LinkedIn