During the mergers and acquisitions (M&A) lifecycle, there are eight key phases through which you must navigate.
The M&A Lifecycle:
- Due Diligence
But to make the right decisions during this process, emphasize the Strategy phase.
What, though, are the main factors of the Strategy phase?
Finding Your Main Competitors
The first part of the strategy phase is to look at all the competitors you must overcome, acquire, or partner with. Knowing who you are up against (their strengths and weaknesses) is vital.
The next step is to draw out a Venn diagram of both companies to see what areas overlap.
Then prioritize the areas that don’t overlap to see if you need to focus on them more or pivot in a different direction.
This list of priorities will make the next step that much easier.
Finding Complementary Companies and Assets
The best thing to look at is businesses that your company already relies upon (bolt-ons), for example, suppliers, manufacturers, marketing agencies, or consultants.
Let’s look at the scenario of a current supplier or distributor. Instead of waiting in line for your business to get its orders processed, what if you simply acquired this company?
Then, you can prioritize your orders while the experts behind the acquisition continue to do what they do best, cross-pollinate business, and reduce your cost of goods sold (COGS).
Another great and cheaper acquisition opportunity is marketing (digital traffic) assets.
You can buy websites, videos, email lists, pixels, Amazon listings, Etsy stores, eBay stores, podcasts, social media groups, and even YouTube channels!
Now that you know what some of your options are, a mind map is the next best step.
Draw a circle in the middle of a blank paper with your companies name on it.
Then add three new circles to it for competitors, bolt-ons, and traffic assets.
Add all the acquisitions that you can think of to this mind map before making your final hit/shopping list.
Here is a list of free mind mapping software, https://thedigitalprojectmanager.com/mind-mapping-software/.
I personally prefer a whiteboard.
And when you think that you have already mapped out every possible acquisition opportunity, go back to your list of priorities from earlier.
If you’re still a bit tentative about making a full-blown acquisition, a joint venture (JV) is the next best option.
Check out this post on creating your JV strategy:
Business Owners Grow 200%+ By Implementing the Oprah Paradigm
Why Does the Strategy Phase Matter in M&A?
Before you move into the valuation process to see what the target company or asset is worth, it is always important to have clear goals and timelines on what you want out of an acquisition.
7 Buy-Side M&A Pitfalls goes over the most common transaction mistakes and serves as a pre-LOI (Letter of Intent) checklist.
At the same time, traffic assets are usually quick transactions, but a business acquisition will take about two months to complete.
Save your time and energy by being specific about what you’re looking for.
Lastly, remember that acquiring will always let you bypass all the pitfalls of starting from scratch.
And to make things even better, a well-executed strategy will turn your business into a healthy cash cow that can support you for years to come or get you a larger multiple when selling.
Looking to Develop An M&A or Growth Strategy?
If you want a hand in developing the best possible strategy for your company, get in touch with ASE today.
Together, we can work towards the right strategy for your business to boost your business’s size, scalability, and profitability.
And join the ASE fleet of business owners!