You want to grow your company. Often the best way to grow is by acquiring another business in your industry. This is often referred to as inorganic growth or an acquisition strategy. An acquisition based growth strategy is an effective way to significantly grow your business. It also is a generally low risk strategy because you are investing in an industry that you have intimate knowledge. It also presents opportunities to build economies of scale leverage cost synergies. Here are five strategies for successful acquisitions.
Start with the end in mind.
The first step in developing an inorganic growth strategy is to define your objective. Is it an offensive strategy or a defensive strategy? Is it a “me too” strategy? Is it an exit strategy or a moat-creating strategy? Perhaps diversification or margin enhancing? These are not rhetorical questions. The answers to these questions matter as they will dictate how you grow, where you grow, how you finance the transactions, etc.
A lot of growth strategies are actually exit strategies in disguise. The quickest way to increase the enterprise value of your business is to roll up a few competitors at “x” multiple, integrate the business, pay down some debt, and sell your larger more profitable business to a consolidator for higher multiple.
Build a team, both internally and externally.
Pursing an acquisition based strategy requires an experienced management team. In many automotive businesses, from auto retail to collision repair, key referral accounts, OEMs, and sometimes even vendors hold significant sway over the viability of an acquisition. These groups often prefer to see experienced leadership at the helm. Bring in management that has experience in acquisitions and integrations. As an owner, don’t expect to do it all on your own. If you are an owner that goes on vacation but doesn’t really go on vacation it may be time to re-evaluate the capacity of your team to manage the additional demands of an acquisition based growth strategy.
