Acquisitions can be a vital component of business strategy. However, for an acquisition to truly add value to a business, it must fulfil a range of requirements.
In the M&A world, the best business acquisitions are those which display ‘The Four Corners of M&A’ – generating economies of scale and synergy, whilst also allowing the buying company or party to keep pace with emerging trends and increase shareholder value.
So, is now the right time to acquire a company?
In the event that a deal fulfils each of these requirements, it becomes very much a question of timing – namely, whether the buying party or company is fully equipped to undertake an acquisition. The following questions must be asked, before actively pursuing a company acquisition:
1.Business Growth Strategy
Is there a robust business growth strategy in place with well-defined objectives and timescales? It is easy to be swayed by the attractions of an acquisition; however, it is essential that any potential deal supports the original goals of the organisation and won’t throw these off course. This is where a robust business plan comes into play, and an acquisition might only be one facet of a larger strategy.
2. Organisation & Logistics
Is the entire organisation (HR, IT, finance, management, systems and processes) adequately structured to facilitate a successful business merger with another company? Can it support new staff and systems?
Are the capital investment requirements and funding facilities realistic? These details must be carefully examined before launching into an acquisition project, so as not to fall at this hurdle further down the line.
4. The Importance of Proper Advisory
Does the company have the skills to target suitable corporate acquisition targets? And does it possess the technical expertise to structure an effective deal? If not, perhaps you could look into a Mergers & Acquisition’s advisory firm, such as Avondale, where you can book a free consultation with our advisers.
5. Be on Target
Is the target list concise and does it only include companies that can truly generate value? A shorter yet succinct target list allows you to look at the businesses that are truly relevant to your wants and needs, allowing you enough time to engage properly with quality targets and to sweetheart them where necessary.
6. Corporate Strategy
Is there a strategy in place to support the smooth integration of a new business, including its employees and other assets? Have you contacted the right people and built the necessary foundations and scaffolding in preparation for the acquisition or merger?
By actively asking yourself these questions and understanding ‘The Four Corners of M&A’, you’ll reap the benefits of a successful company acquisition to complement your business strategy. Read our technical guides – specifically Guide 1: Valuation Methods and Multiple Arbitrage – for more information and technical advice on ‘The Four Corners of M&A’ and the M&A process in general.
Are you thinking about buying or acquiring a business? Call us today to speak to one of our award-winning consultants
on: 020 7788 8250 or, alternatively, fill in our contact form and a member of our team will get back to you.