As a business owner, growth by acquisition can seem like an appealing option over organic growth, however it is not without its pitfalls. Below we have noted some key advantages and disadvantages.

Acquisition allows you to accelerate your growth plans by acquiring businesses, to expand and grow revenues and profits. However, it can be risky if you let the weight of the transaction distract you from your business-as-usual operations, or if you fail to carry out the required due diligence on the target business and end up firefighting issues as they arise. To support you with your decision on whether to grow your business by acquisition, we highlight the key advantages and disadvantages below.

Advantages

Timing

Acquiring an already fully functioning business is normally a much faster process than reaching that position yourselves. It provides you with the chance to acquire resources, skilled staff and additional clients. You’ll also acquire your target business’s brand reputation, which is a valuable asset that can help to increase the awareness of your own brand and reduce the risk of new service or product development in future.

Improved results

You and your shareholders may be eager to make step jumps in the growth of the business. Making an acquisition normally results in immediate increases in revenues and profit, helping you to meet your growth targets as well as those of your investors.

Market share

Acquiring a business in your existing market can significantly build your market presence. Aligning your existing market synergies with your newly acquired business can give your business a competitive edge.

Business synergies

The best acquisitions are synergistic, where the profits (and value) of the whole is greater than the sum of its parts. Growing by acquisition means that the acquirer can reduce the overall cost base by combining back-office functions, such as accounting and marketing. The businesses may also provide synergistic services where they service either similar or the same clients. By merging they are able to offer an improved service and maximise revenues and profits.