There are many legitimate reasons for acquiring another company. These include:
- expanding your markets
- acquiring people, systems or processes
- acquiring new products, services or customers
- achieving economies of scale
- reducing expenses
- creating opportunities for cross-selling
- acquiring new distribution systems
- eliminating competition.
Ultimately, however, all legitimate reasons for contemplating an acquisition fall under one all-encompassing umbrella: the desire or need for quick and substantial growth.
When you get down to it, the only real reason to acquire a company is to create significant growth. If you want to grow incrementally, don’t bother with an acquisition.
To tell whether an acquisition makes sense for your business, ask three simple questions:
- What are the different ways I could grow my business?
- Could an acquisition help me achieve that growth?
- What larger, strategic goals will that growth help me to accomplish?
What makes for a good acquisition?
To secure a worthwhile deal, you need to have:
- a solid foundation in place, meaning that your people, systems and resources are sufficient to handle integrating another company
- a well-planned acquisition strategy
- realistic plans in terms of expectations and time schedules
- appropriate price and terms, with a “realistic” debt load
- clear and well-executed people/transition plans
- reasonable additional capital investment requirements
- clarity around your personal and professional expectations for the deal.