October 5, 2021
As an entrepreneur, you’ll always be on a never-ending journey of consistently growing your business. And why not? Successful businesses seek to form long term relationships with their clients, increase their profit margins, and expand their customer base. However, one of the common barriers to expanding your business will be to identify key components to help you do so – and at a quicker pace.
Mergers and acquisitions are an excellent macro strategy to expand your business faster. You see, one of the best advantages of M&As is that you won’t have to spend years waiting for your sales and advertising strategies to pave the way for future growth.
The core objective of an organization seeking a merger or acquisition is to take streamlined advantage of a business opportunity that will result in two things: propelling growth and/or highlighting a specific area in the business that can be expanded by onboarding a new line of products or services catered to a market that the company doesn’t presently serve.
The prime motivating factor behind going for an M&A strategy is that it offers a powerful and highly effective combination of key expertise, products/services, and your current sales pipeline, enabling your business to penetrate new markets. You’ll be in a strategic position to offer streamlined products and services, cultivating a brand new customer base.
Mergers and acquisitions are ideal to counter different scenarios. For instance, you could be faced with a business opportunity that must be acted on quickly – requiring you to be decisive. Or you may face competitive market forces, compelling you to grab a bigger market share by becoming dominant.
In light of this, here are 3 critical situations where M&As have played an instrumental role as a powerful growth strategy.
As soon as the market experiences abrupt changes due to evolving trends, regulations, and/or independent events, it will leave a wide gap in a company’s main product/service offerings. This will present a unique strategic advantage for a merger.
For example, after the Facebook hack in 2020, which resulted in the loss and theft of over 500 million users, cybersecurity companies quickly realized that they needed to make rapid changes to match the best online security requirements.
Companies also identified that they may be excluded without the skills vital to match the demand for newer and improved cybersecurity systems. So, software firms that had relevant experience and client lists quickly realized they’re in a valuable and unique position to become sought-after entities.
An increasing number of industries have identified a critical plummet of talented human resources. And some of the main examples that you can think of here can be cybersecurity, technical engineering, financial accounting, etc.
You see, it’s important to understand that the key to consistent growth for modern businesses is acquiring relevant intellectual property. Sure, this wasn’t a core component a decade ago, but today, buying and selling IP has become commonplace. For organizations, acquiring a company and its intellectual property is the fastest way to becoming powerful market force.
A well-planned merger or acquisition can yield synergies that can manifest into win-win strategies for both parties involved. There are two major synergies associated with a successful M&A that you can take advantage of – and these are:
These are strategies that will help your business mitigate costs by amalgamating various operational efficiencies and resources into one powerful and growth-centric entity. In a thoughtful merger and acquisition, there are variety of different sectors that can be primed for cost-cutting – for example, redundant human resources, underutilized operations and/or facilities, slow areas of operations, etc. However, cost-based synergies also offer another powerful advantage as well, and that’s increasing your negotiating and buying ability by giving you access to a bigger budget.
Revenue synergies can completely change your company’s competitive dynamics – strategically positioning you to take advantage of growing opportunities to make shifts in pricing and sell more products and services. Becoming a bigger entity means having the human resources and budgets to grab a bigger market share. These revenue synergies are going to help you develop multiple funnels to make more money. Here are some ways you can maximize your profit margins:
• Plummeting competition
• Opportunities to enter untapped territories
• Gaining new intellectual properties and talented human resources will help identify newer markets
• Significantly enhancing your cross-selling capabilities thanks to a bigger customer base
• Propel upselling opportunities by introducing complementary products/services to your customer base
In all, a good merger and acquisition strategy will enable you to propel faster than conventional, organic methodologies. It will help you identify new areas for business, effectively absorbing or eliminating smaller market forces and competitors.