When you want to grow your business, there are several different strategies that you can implement, one of the most effective being an acquisition. Acquiring another business is a bold move that can be incredibly lucrative for a company when done the right way. However, rushing into an acquisition without a proper game plan and guidance could open up an endless stream of financial and legal issues. The right move is to develop an effective acquisition strategy, and here are some tips on how to do it.
When should you consider executing an acquisition?
In business, you can have a great strategy in place, but timing also plays a huge role in whether your plans will be successful. Here are some situations in which considering an acquisition could be beneficial:
- When you want to acquire competitors to bolster your position and minimise competition
- When you have the available capital
- When you notice that organic growth has slowed down and you need a new way to drive new opportunities
How to develop an effective acquisition strategy?
Acquiring another business is no small feat. As with your company’s overall corporate strategy, your acquisition strategy needs to be compartmentalised into achievable steps. So, here are some tips to help you develop an effective acquisition strategy.
1. Hire an advisor
When your goal is to grow your business through acquisitions, having a corporate advisory specialist can prove beneficial in several ways. While it is possible to acquire another business by yourself, corporate advisors have the knowledge, skills, experience and resources to help you strategically and successfully acquire businesses that line up with your specific goals. So, decide whether or not having an advisor on your team is worth it. Lloyds Corporate is one of the best corporate advisory specialist firms in Australia. So, if you’re planning an acquisition, we recommend seeking their help to succeed.
2. Write a solid mission statement
A successful business acquisition starts before you even have a target in sight, and the key is to know exactly what you want. The way to go about this is to first write down a clear mission statement for the acquisition. Doing this will give you something you can refer back to when you’re in the thick of things and are feeling unsure about your objectives. A solid mission statement can also help you assess whether or not a target business is really the best fit for your goals, as it will set the parameters for it. Some parameters that you would generally include in the mission statement are:
- The maximum acquisition price
- Target location
- Target revenue and income
- Market segment of the target
3. Set realistic timelines
Everyone would love to close a deal in three months. Realistically, it’s more likely to expect a timeline of 12 months or more. Setting realistic timelines for your acquisition is important, as this will impact your budget for the next few years. A timeline can be flexible, and it’s best to break it down into smaller goals to help you see if you are on the right track.
4. Define and assign responsibilities
You can’t expect a good deal to just land on your desk when planning an acquisition. So, a key part of developing an effective acquisition strategy is assigning individual responsibilities. This could be one of the company’s directors, but this is where hiring a corporate advisory specialist can prove to be highly beneficial. The individuals assigned to particular tasks of the acquisition must regularly provide feedback on finding targets, the acquisition’s progress, and the market’s overall state.
5. Design a target search
Next up is to design your target search. Finding a suitable target company requires you to be strategic about who you assign the task to. A corporate advisory specialist typically has an extensive network of contacts and suitable targets, which means they tend to be able to find suitable targets and deliver results faster. An internal team will often take longer as their attention and resources will be divided between doing their typical tasks and working on the acquisition.
6. Determine your outreach strategy
Once you’ve found a suitable target, the next step requires you to be discreet and calculated as you need to determine how best to make contact with the business and initiate the acquisition process. You need to have an effective outreach strategy to help you land the deal. A good outreach strategy could include:
- Making direct contact
- Approaching the target at industry conferences
- Making contact through third parties
- Sending a registered letter to express interest
Final Thoughts
Business acquisition is an ambitious plan to drive growth, and with ambiguous plans comes the need to ensure that you’re implementing an effective acquisition strategy. With these tips and the help and guidance from the right corporate advisor, you should be able to develop a solid strategy to successfully acquire another business and grow exponentially.
