Growth through acquisition has been a strategy largely used by mid-sized and larger companies for years. Now firms in the lower mid-market are getting into it as well.
Under this strategy, a company buys another entity for reasons that include:
- building market share
- gaining access to a new market
- getting special skills or services offered by the target
- to get access to skilled personnel in an increasingly tight labor market
An acquisition can greatly compress an organic growth strategy which could take years and major strategic investments to accomplish.
We are seeing smaller companies in the region achieving scale more quickly with acquisitions, one of which is referenced in the second article in this newsletter where a N.H. company acquired part of a Maine entity for just this reason.
This process involves targeting competitors or related entities for acquisition. When another company is purchased and combined with the acquiring entity, the result is a larger, more dynamic business. The goal is to grow the top line, and then – through efficiencies, market expansion, greater customer reach – to grow the bottom line for the combined entity as well.
Owners engaging this strategy should have the long-term in mind. It may take months or years to fully achieve the potential value.
There is an added benefit to the new ownership: the company is larger and more likely to be of interest when the time comes for a sale.
Our team will work with owners and other advisors to plan out and initiate such a strategy.