Opinions expressed by Entrepreneur contributors are their very own.
Mergers and acquisitions (M&A) have turn out to be more and more fashionable amongst massive companies as a enterprise technique. Nevertheless, small and medium-sized companies could hesitate to have interaction in M&A as a result of perceived complexities and dangers concerned. This should not essentially be the case.
M&A refers back to the course of of mixing two or extra corporations to kind a brand new entity, or to have one firm take over one other. It’s true that M&A carries inherent dangers and the method might be intricate, however in lots of instances, the advantages far outweigh these hurdles. M&A is usually a strategic transfer for big and small corporations seeking to broaden their enterprise operations, acquire a aggressive benefit or enter new markets.
All through my profession, I’ve accomplished greater than 20 profitable offers — M&A is a method I’ve employed time and time once more. These purchases have accelerated our development, allowed us to broaden into new industries and markets, and so they afforded us new experience, applied sciences and elevated the providers we’re in a position to provide our clients.
Listed here are 5 causes I believe small and medium-sized companies ought to contemplate M&A as a development technique.
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1. New markets and clients
M&A can present entry to new markets and new clients. Buyer acquisition might be expensive, each in time and assets, however buying an organization typically comes with established clients which are already conversant in the services supplied. This may be particularly helpful for increasing geographically or into new industries.
For instance, a software program firm that makes a speciality of gross sales administration instruments could purchase a undertaking administration software program firm to achieve entry to a brand new market. It’s a big profit if the acquired firm has a longtime buyer base in a distinct geographical area or trade, which may also help the buying firm broaden its attain and diversify its choices.
Moreover, buying an organization in a distinct market can present a brick-and-mortar presence and a foothold there.
2. Price financial savings
There are vital price financial savings and economies of scale that may be achieved by way of M&A. By merging with one other firm and mixing assets and operations, they’ll get rid of redundancies, streamline processes and profit from synergies — equivalent to shared overhead prices, lowered administrative bills and improved buying energy.
This will enhance profitability which is important for smaller corporations with restricted assets. Moreover, by leveraging the strengths and assets of each organizations, the corporate can create a extra environment friendly and efficient enterprise mannequin.
3. Variety of services
By buying a enterprise that gives complementary services or products, an organization can broaden its choices and doubtlessly faucet into new income streams.
For instance, an organization that sells workplace provides could purchase a printing providers firm. By providing a extra complete answer, the corporate can differentiate itself from its rivals and may also present alternatives for cross-selling and up-selling.
In that very same instance, the workplace provides firm can then promote its printing providers to its present buyer base and vice versa, serving to to extend gross sales and buyer retention.
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4. Expertise acquisition
An acquisition can create a possibility to stage up or add expertise throughout the group with extremely expert staff.
With the workers of each organizations mixed into one, the merged group can profit from a extra various and expert workforce. Moreover, the corporate can purchase new experience.
As an example, a advertising company could purchase a search engine marketing firm to spice up its digital advertising capabilities. Entry to new applied sciences or experience may also help drive innovation and development.
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5. Exit technique
Lastly, M&A can present an avenue for an exit or a liquidity occasion for enterprise house owners or buyers. Enterprise founders or house owners who wish to retire or enterprise into different enterprise alternatives can promote their firm and exit the market.
Promoting to a bigger group can present not solely a worthwhile exit for them, however it might probably additionally assist make sure that their firm and staff will proceed on and develop. Moreover, M&A can present liquidity occasions for buyers and shareholders, unlocking worth and offering a return on funding.
Small and medium-sized companies can considerably profit from mergers and acquisitions as a strong development technique, simply as massive companies can. And whereas all M&A exercise does carry dangers that have to be rigorously thought-about, there are vital advantages.
It may be complicated, however the proper associate may also help you navigate the method. By adopting the proper method and technique, M&A is usually a game-changing alternative for any measurement firm to take their enterprise to the following stage.
