Many businesses continue to make business acquisitions as part of their strategic growth plans. Reasons may include:
- To speed up growth. It may be argued that growing a business organically is slow and problematic.
- Diversification, which may allow risk to be spread between different products or markets.
- Allows entry into new geographical markets.
- Provides entry into an established sector.
- The acquisition can be used to create synergy, whereby overall performance of the joint entity will increase and costs will fall.
- Growth, as enhanced market share may bring additional benefits.
- Increased supply chain pricing power by acquiring a supplier or distributor.
- Allows competition to be eliminated.
For some clients an acquisition will be a one-off event and for others it will form a natural part of growing the business on a regular basis.
As part of the acquisition process by our clients, our assignment may be to make general approaches to a business sector to identify targets. Alternatively we will be required to make initial approaches to competitors, or local companies.
Many factors will contribute to the success or failure of an acquisition. Over valuing the acquisition or taking on excessive funding is likely to create problems.
In addition to financial considerations, the cultural fit of the business will be critical. Often similar organisation will operate very differently which will prevent a merger from being successful and careful planning is therefore crucial.
If you have any questions regarding the acquisition of a business – please get in touch with your usual Lambert Chapman contact and we will be happy to assist.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.