Growth by Acquisition

Martz Witty

Head of the Martz Group.
www.martz.co.nz

Looking for a quick fix to grow your business? Got the infrastructure ready but simply need a sudden influx of raw sales?

Well then maybe growth by acquisition is the answer for you. I highlight maybe it is the answer because it is certainly never a ‘one size fits all’ solution.

Growth by acquisition has been around for many years and has served many businesses, but it has tripped up a good many too. The typical pitfalls and traps include (but are not limited to):

Insufficient time spent on due diligence.
I can’t express enough that the time checking the numbers before acquisition will reap magnificent returns later. Run the numbers through your financial models, check capacity; can you actually produce enough output to support the additional sales you will achieve from the merged party?

People power.
What staff are coming with the organisation? Are they key to the success, or is there a need to trim excesses as part of the merger? What holiday pay entitlements are being taken over, sick leave, long service leave? Or is it a fresh employment agreement in which case you might not secure the staff retention.

Company culture.
Is there a different culture in the incoming party? Will this enhance or detract from your own? What is your control mechanism to ensure it doesn’t turn into a reverse takeover? Have you got the skills in-house, or at least hired in change management assistance? Will the new and improved version of your business be “This is the way we do things around here” or open to improvements? Have you got a system for submitting suggestions for improvements?
Cashflow.
Cash is always king. Have you assessed inflow and outflows in the interim while the new people (let’s call them mergettes) come up to speed with new surroundings, systems and bosses? What are new overheads going to look like, what savings can be obtained through economies of scale?

Duplication.
We see all too often where parties merge through acquisition, that some positions simply double, whereas they could be better served by a structural change. Managing the people is always harder than managing production, sales and even distribution. The human element has emotions and feelings, the rest is pure mathematics.

Natural attrition.
It’s inevitable that in any merger there will be a fallout of clients. The key is to manage the fallout and minimise the impact.
So growth by acquisition is great if you work it. The option is organic growth which can be even better, but typically takes a lot more time. Either way – happy growing!

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