If you are an entrepreneur or a business owner, you know that growth is a vital element in the success of your organization. One way to achieve growth is through mergers and acquisitions (M&A). This article will discuss the five compelling reasons why business acquisition should be your next strategic move.
1. Increased Market Share
Business acquisition enables a company to expand its market share by acquiring the customers of the acquired business. With more customers, the business can increase its sales revenue, which leads to more profits. Moreover, with a larger market share, the business can negotiate better deals with suppliers and vendors, reducing its operational costs.
Take the example of Tesla’s recent acquisition of SolarCity. The acquisition allowed Tesla to expand its market share in the renewable energy sector. Before the acquisition, Tesla was focused on electric vehicles, but with the acquisition, it can now provide solar panels and energy storage solutions. The expanded portfolio has allowed Tesla to reach a broader market, increasing its revenue streams.
2. Access to New Talent
Acquiring a business brings experienced professionals and skilled staff into your organization. This is especially important if you are expanding into a new market. With experienced professionals on your team, you can leverage their skills and expertise to grow your business.
An excellent example of accessing new talent through acquisition is Facebook’s acquisition of Instagram. Facebook was looking to expand its presence in the mobile app market and recognized the talent and creativity of Instagram’s team. By bringing this talent into the Facebook team, they were able to grow Instagram’s user base and create a new revenue stream through advertising.
Business acquisition also allows a company to diversify its portfolio. By acquiring different types of businesses, a company can reduce its reliance on a single product or service and spread its risk across multiple sectors.
A prime example of this is the pharmaceutical company Pfizer’s acquisition of Wyeth. Pfizer had a portfolio of successful products, but they were primarily focused on treating chronic diseases. Through the acquisition of Wyeth, they gained access to a diverse range of products spanning many therapeutic areas, enabling them to diversify their portfolio.
4. Competitive Edge
Acquiring a business can be a strategic move to gain a competitive edge. By acquiring a competitor, a company can eliminate competition, increase its market dominance, and gain access to new customers.
A well-known example of this is the acquisition of Skype by Microsoft. Microsoft saw the potential of Skype as a tool for business communication and wanted the competitive edge that Skype had over other video calling platforms. By acquiring Skype, Microsoft gained access to its user base and technology, enabling them to develop and improve their own communication tools.
5. Cost-Effective Growth
Business acquisition is often a more cost-effective way to achieve growth than starting from scratch. Acquiring a business that is already established saves time and resources that would otherwise be spent on market research, branding, and product development. Moreover, with an established customer base and revenue stream, the acquired business is likely to generate income for the acquiring business from day one.
Amazon’s acquisition of Whole Foods is an excellent example of a cost-effective growth strategy. Whole Foods had an established customer base and a network of stores, which allowed Amazon to enter the grocery market quickly. The acquisition allowed Amazon to offer grocery delivery to customers, making Amazon more competitive in the retail market.
Business acquisition can be a strategic move for companies looking to achieve growth and unlock new opportunities. Increased market share, access to new talent, diversification, competitive edge, and cost-effective growth are all compelling reasons why business acquisition should be your next strategic move. However, it is essential to conduct thorough due diligence before undertaking any acquisition to ensure its success. By leveraging the benefits of business acquisition, entrepreneurs and business owners can pave the way for a more profitable future.