In every successful business, the goal is sustained growth over a long period. This can be accomplished in a number of ways; growing market share with your current product offerings, adding new and complimentary products and/or services, and acquiring a competitor are three of the primary ways to grow a business. In addition, within each of these methods is a large subset of strategies to successfully accomplish each. 
Perhaps the simplest of the business growth strategies is an acquisition of a competing business. If you have the capital and/or financing, it is tempting to take this route. However, there are times when it is better to resist the temptation and choose an alternative growth plan.
Under What Circumstances Does a Competitor Buyout Make Sense?
There is definitely a right time and a wrong time to consider a business acquisition. Several questions must be asked before taking steps toward a merger or acquisition. Here are three of the most important:
- What added value is the acquisition target bringing to the table?
- How will the current management and employees mesh with your staff?
- Will the newly formed entity emerge stronger or weaker than your present company?
The bottom-line with any merger or acquisition is it should be for positive reasons; that is, to give you a stronger position within the marketplace, as opposed to wiping out a competitor simply for the sake of reducing your competition. So all considerations lead up to answering Question 3, and there should be no disputing that the new company will be stronger and better positioned for future success than you are today.
Toward that end, let us examine Question 1. The company you are considering should add value to yours that you cannot gain by simply growing market share with your present product and/or service offerings. If this is the case, make sure it is not something you could easily offer yourself. A good example of this would be a patented technology that has the potential to revolutionize your industry. If they truly have something special to offer, then an acquisition is certainly a worthy consideration.
Another way the new company may be able to add value is through human talent, which brings us to Question 2 regarding management. At the very least, the present management of the acquisition target should be competent and your company’s compatibility with them should be thoroughly examined. Even if you plan to lay off most of the management, there will still be a transitional period where they will be needed. If however, the acquisition target has strong talent that can help your company run better, that is an added bonus.
Acquisitions can be a complicated process, and they are best handled with deliberation. Be sure you are considering it for the right reasons, and be sure that at the end of the day, your targeted acquisition will make your company stronger. Lastly, it is always good to partner with a professional that has experience with acquisitions in your industry and an extensive understanding of the process. This will help ensure a smooth transition and a successful future for your company.
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