Is expansion through acquisition right for your business, right now?
If you’re considering an acquisition, there are crucial elements to have in place before you sign on the dotted line.
Owners of privately-held businesses are usually in pursuit of growth. Growth can be a complicated proposition, with speed and tactics all dependent on specific growth goals. Whether you want to increase the number of clients, staff or services, or perhaps expand into new markets, organic growth is usually part of the plan. But if your growth goals are more aggressive, a strategic acquisition might be the right path for your company.
How acquisitions generally work
In most acquisitions, a company buys another company with cash, stock or a combination of the two. The purchasing company can achieve economies of scale, increased efficiencies and enhanced market visibility. The acquisition can also expand the company’s client base and talent pool, add new capabilities and markets, and help increase shareholder value, among a variety of other benefits.
Positioning is everything
This strategic path to growth is attractive to owners of privately-held businesses whose companies are strong and thriving. A company that is best positioned to acquire another should meet four essential criteria:
- The company is prosperous. It must be doing well now and be positioned for the future with a solid, strategic growth plan.
- A strong business model is in place. The model should be reflected in a strategic plan that identifies requirements of the acquisition.
- There is a robust corporate management team. A capable team of executives will be required to help facilitate a smooth transition during and following an acquisition.
- The company has access to capital. Cash reserves or a healthy borrowing capacity are needed to complete an acquisition.
Obtain guidance along the way
Throughout the acquisition process, it’s important to work with a trusted advisor for strategic guidance. Careful planning with acquisition professionals will help you make smarter decisions and avoid pitfalls. The right advisor will also explain the financial consequences of your acquisition options. As well as discussing risk factors, the advisor should explain value creation opportunities related to your company.
Prosperous companies with good management teams, strong business models and access to capital can take advantage of acquisition opportunities, even in a volatile market. No matter the structure, an acquisition can create synergy that makes the value of the resulting company greater than the sum of its original parts.
For more information, contact:
CliftonLarsonAllen LLP, US
T: +1 612 376 4500