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Will an Acquisition Help or Hinder Your Business? Essay

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An acquisition could increase the size and profitability of your business overnight. It might allow you to take advantage of new economies of scale, or move into new areas. You might be able to acquire a bigger and better customer base, or strengthen your management team.

But an acquisition can also bring problems, draining financial and management resources from your original business.

You need to work out whether the acquisition will add value to your business, after making realistic allowances for all the hidden costs. To be successful, it will need to bring a number of benefits to your business. This briefing covers:

• The arguments for making a business acquisition.
• How to use an acquisition to expand your business.
• How to use
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How can you avoid them?

• Are you facing new and aggressive competitors?
• Is your market static or declining?
• Are you over-dependent in a critical area — for example, on a particular employee or customer?
• Are you subject to cost pressures that you cannot pass on to your customers?

Having completed this SWOT analysis, you can compare the benefits and risks of an acquisition to the alternatives

2.Expanding your Business

If you integrate another business into yours, both could benefit from the expansion.

2.1 There may be opportunities to cross-sell to each other’s customers. • This may be difficult if the two businesses have conflicting cultures and systems.

For example, if you sell equipment to NHS hospitals and you acquire a company which makes quick one-off sales of equipment to medical practices.

The length of the normal sales cycle customers are used to can be a major cultural factor.

2.2 You could improve the public view of your company.

• Bigger companies are often believed to be more reliable, and you should get better brand recognition.

2.3 You should benefit from opportunities to develop other products.

• A wider customer base makes successful new product launches more likely.

3.Reducing Your costs

With a higher volume of activity, you should be able to achieve majorl economies of scale.

3.1 You can make better use of overheads.

• Make savings in central functions, such as finance,
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