Acquisition Strategies – Growth Through Acquisition
Growth through acquisition is not only the exclusive preserve of large or public companies. Small scale businesses also have the right to grow and can even acquire other businesses in the process of actualizing this goal. A business acquisition can lead to a spike in sales and profits. But it must be done right.
Here are some acquisition strategies that work great for small businesses:
Acquire a Company
Acquire a company with smaller price/earnings ratio than yours. For instance, if your business with a P/E ratio of 15 acquires a smaller company and pays 10 times in earnings, this means that the smaller company of 10 million dollars in earnings is added to your company. Your newly acquired company is now worth 15 times more. This leads to an increase in earnings of 5 times or even $50,000,000 over and above what is paid.
Buy into a Plan
When you acquire a new business, you do not buy it because you have money to splash or because it is available. You buy because it complements your preexisting company and can make it even more competitive in the marketplace. Before you buy, you should consider the channels of distribution, product potentials, technological opportunities, overseas market, franchising and the quality of workers available.
Develop the Plan
A good plan always begins with a SWOT analysis. You need to take stock of your company’s strengths, weaknesses, opportunities and potential threats. If you can put all these things in proper perspective, you have a strong idea of what type of business you should be looking to acquire or pay top dollars for.
For example, if you own a printing service company with an annual gross of 5 million dollars for producing high-speed black and white forms and manuals for the IT industry, you should consider an opportunity to start an alternate printing service that caters towards a different customer base.
Design and Research
You can use the Internet to bolster your plan. Utilize the databases available online to find businesses of interest. Find out where they are located, their annual revenue sales, how many employees they control and their range of products.
Once you settle on a crack list of acquisition prospects, you can mail them, call them or even pay them a visit. You can do this yourself or employ the services of a professional to broker the deal for you. Remember that the timing must be right and that you have the cash readily available to conclude the deal.
About The Author
Alam Qureshi is a Certified Business Intermediary (CBI), Certified M&A Professional and Broker of Record at ProClient Brokers Inc., Brokerage. He helps business owners learn how to sell a business so they can get the maximum value for their company. call us 416 364 5550 or CONTACT US to get in touch.
Date modified: 7-24-2019