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Growing your business is necessary for success. Acquisitions are a powerful strategy to achieve growth by generating economies of scale, reducing competition, driving financial growth, and accessing new markets. Using acquisitions as a growth strategy requires careful planning to ensure success. This article outlines what you should think about when considering an acquisition.
Acquisitions are more than just buying another company; they are strategic decisions aimed at accelerating growth. Through acquisitions, businesses can gain advantages that may otherwise take years to develop. The strategic intent is often driven by goals such as:
Any business with the primary goal of growth should make mergers and acquisitions a key focus within their strategy. Boards often focus on organic growth, but external opportunities can be the key to success. Many New Zealand businesses hit plateaus in their growth journey due to economic changes, the political landscape, competition, limited talent recruitment, labour shortages, and asset limitations.
Despite the potential benefits, acquisitions come with risks and challenges that must be carefully managed:
Due diligence is a critical part of any business acquisition and should be undertaken with careful consideration. It involves the collection, review, and analysis of business information before deciding to buy or invest. Robust due diligence provides assurance on the transaction and ensures informed decision-making, enhancing the likelihood of a successful deal.
Funding an acquisition can present several hurdles, whether through debt, equity, or a combination of both. Each financing method has its own advantages and considerations in terms of cost, risk, control implications, and financial flexibility. Some common financing options include:
It’s essential to surround yourself with the right team to assist in the planning and execution of any acquisition. Human nature can result in tunnel vision and a focus on the positive aspects of a business. However, having a diverse and experienced team will provide objective views on business opportunities and investments.
Post-acquisition growth extends beyond the deal and focuses on realizing synergies, exploiting new markets, and fostering a cohesive framework to drive sustainable value. Continuous evaluation and adjustment are important to ensure sustained performance and long-term success.
While an acquisition strategy can provide a gateway to growth, success hinges on thorough planning, alignment, and effective execution. Careful consideration and evaluation of opportunities to drive sustainable growth can provide a significant advantage in a competitive landscape.
Are you looking to buy a business or ready to explore how an acquisition can drive your business growth? Contact one of our trusted Nexia Advisors today to discuss your options and develop a tailored acquisition strategy that aligns with your business goals.
Nexia is one of New Zealand’s best accounting and business advisory consultancy firms offering the full range of accounting, advisory, audit, tax and insolvency services. Nexia New Zealand has offices on Victoria Street in the Christchurch CBD, Albany on the Northshore and Newmarket in Auckland, and Hastings in the Hawke’s Bay.
