Should You Grow Your Business Through Acquisition?

If the value of your company does not meet your needs and desires for financial security and freedom, then you must increase it. 

You have two options—you can either let your company grow organically, or you can graft on new growth through the process of acquiring other companies. 

Organic growth takes time, and possibly skills, people, or assets that you do not have. Acquisitions allow you to grow as quickly as you would like, but you will need to do your due diligence to be sure you are getting what you expect. 

The Benefits of Acquisition Growth Strategies 

Choosing an acquisition growth strategy can help you to:

  1. Enhance the diversification of products and services

  2. Reduce competition

  3. Increase market share

  4. Achieve economies of scale

  5. Expand geographically

  6. Develop strategic alliances

  7. Accomplish greater leverage with vendors

  8. Add new product or service lines

Value Drivers

When deciding to grow through acquisition, it might be tempting to acquire a turnaround company, which is a business that is struggling. While these can result in cheaper acquisitions, they also carry a lot of risks, and it is often wiser to implement a different strategy. 

One alternative to acquiring a turnaround company is to find a good company with a strong history of performance. Good companies cost more, but the road to success will be more certain.

A great way to determine a company’s quality is to look at its value drivers. These are characteristics that influence a buyer’s decision about how much to pay for a company. 

Value drivers common to all industries include:

  • A stable, motivated management team

  • Good and improving cash flow

  • Operating systems that improve the sustainability of cash flows

  • A solid, diversified customer base

  • Effective financial controls

  • A realistic growth strategy

  • Facility appearance consistent with asking price

Support from MKP Law

If you properly analyze all of your potential acquisition opportunities by doing your due diligence, you can structure your financing intelligently and negotiate a fair purchase price with reasonable terms and conditions for a company with the value drivers you are looking for. Over time, your acquisition growth can outpace organic growth.  

If you have any questions or would like to learn more about this topic,  please reach out to MKP Law at info@mb-law.law to request your complimentary copy of Deciding To Sell Your Business, The Key To Wealth And Freedom, which has over 50 questions with detailed answers.