Key drivers that deliver a quality acquisition experience
What are the key drivers that deliver a quality business acquisition experience? We explore four of the most important factors to consider.
Within the business world, businesses are regularly incorporated into larger entities after performing successfully. This is usually done with the mindset that it’s a win-win for both sides – the business being acquired gets to make the most of their now enhanced capabilities, while the entity performing the acquisition gets to add to their successful portfolio of businesses.
There are some key areas which define whether the acquisition will be a positive move for both sides, making it a rewarding experience for all involved. We’ve broken down the acquisition process and what those key areas are to showcase the ideal acquisition experience.
What is a business acquisition?
Acquisition is usually discussed as part of the mergers and acquisitions process within corporate finance. This is typically where a larger business or group approaches another party with the ambition to bring them into their wider corporation.
The ownership of the business is typically what the transaction revolves around, with the overall merger and acquisitions strategy allowing the acquired business to grow or downsize depending on the agreed business future.
The four types of merger and acquisition deals
There are typically four major categories into which acquisition deals will fall into:
- Horizontal acquisition – Two direct competitors consolidate into one company.
- Vertical acquisition – Two companies that are part of the same value chain merge to consolidate aspects of the production process.
- Product extension – A company acquires a business with products that are related to, but not in direct competition with, their offerings.
- Market extension – A company acquires a business that sells similar products in a different market.
This is what will motivate the business seeking to acquire the other within their deal, with their intentions being made clear to the business which is being purchased.
Key factors for successful acquisition deals
At the end of the deal, both parties should be satisfied that the acquisition is in the best interests of either business. There are several crucial considerations which can help drive this success and fuel a productive merger and acquisitions process. Here are four of the most important.
1) Be transparent about the overall ambition of the deal
Honesty is a crucial aspect of any deal. No one wants to feel like they’re being kept in the dark.
When discussing what the deal seeks to achieve, ensure that the business being bought understands their position and what will happen to their business as part of the acquisition.
2) Understand that a deal is about accelerating towards goals
Acquisitions can bring both parties closer to their overall goals. Smaller businesses can utilise the support from a within a wider business, while said business can make use of the freshly acquired skills and resources.
Ensuring that the benefits to both sides are laid out and clear will help facilitate a faster negotiation process. Lewis Sellers, Managing Director of email marketing automation platform Wired Plus said: “We’ve experienced outstanding growth since joining the group as we benefit from their platform.”
3) Maintain the relationships on which customer bases are built on
Businesses are buoyed up by their loyal customers, and they’ll be hyperaware of any changes brought on due to a merger. Maintain the same lines of communication and presence as before to avoid any disruptions within existing customer bases.
These are the people who have made the deal possible and added value on both sides, so nurturing these existing customer relationships is essential.
4) Set out the metrics for success and measure frequently
The successes which are being set out in deals can all sound very alluring, but setting out practical metrics to monitor helps to make them a reality.
This ensures the benefits of an acquisition come to fruition, as well as identifying pain points if these benefits are slow to materialise.
Look beyond these four points when putting together a successful acquisition – they can serve as a good springboard for setting out your own deal and what success looks like there. Most of all, make sure everyone is on the same page and no one is left behind by an acquisition which could hinder progress later down the line.
Photo by Mary Eineman