Financing Business Growth Through Mergers and Acquisitions
Mergers and acquisitions have become the go-to for businesses looking to take advantage of new and existing markets, particular employee skill sets, and technological advances. But even with these benefits, do mergers and acquisitions hold the key to growth for every company? Below, we discuss instances when they are a solution and when they are not.
When Mergers and Acquisitions Are the Solutions
If your business is looking for ways to reduce operating costs and increase revenues, then mergers and acquisitions will be an ideal fit. Companies can consolidate facilities and workforce, giving room for increased negotiating power in the marketplace. This translates to increased customer bases and more revenue, helping both companies benefit in the process.
Take Advantage of New Business Models
Rather than testing out new business models, joining forces with an existing firm comes with the benefit of guaranteed product line success, helping companies reduce any failures along the way. This strategy especially comes in handy in new marketplaces, allowing businesses to tap into new areas with room for unlimited growth.
Filling Gaps in Talent and Leveraging Intellectual Property
A change in a company’s business environment can occasionally leave it grappling with factors such as new regulations, a shortage of experienced staff, and entry barriers due to intellectual property laws. When this happens, firms in need of talents such as cybersecurity experts and those without the necessary IP accreditation will often have to seek out those with the required expertise, creating beneficial partnerships.
By diving into a fully functioning line of business, companies get to save up on resources such as employee costs and equipment purchases required to start a business. It also cuts down the learning curve needed for scaling up growth, helping you acquire an already thriving customer base with ready revenue.
When Merging and Acquiring Will Derail Your Growth
Causes Marketplace Confusion
Marketplace confusion can often occur when firms that offer specialized operations such as accounting fail to benefit and synchronize with acquired firms like cybersecurity companies, causing a lack of vision for future operations.
Creates Cultural Problems
Every firm comes with different cultures, a factor that can prove challenging to resolve during integration. To ensure you stay clear of this, define the kind of culture needed going forward. This will often include training, with the right incentives going a long way in helping employees adapt to changes.
Loss of Differentiation and Brand Strength
When the assets and capabilities of one firm do not match the other, an acquisition will slowly turn into a failure as it will only dilute existing company operations. In addition to this, if your reputation and visibility are not enough to pull in a significant portion of your acquired market, you will likely suffer diminished brand strength, resulting in losses for both companies.
If your focus is on mergers and acquisitions, finances will be a crucial part of your journey. Get in touch with DrawBridge Capital today to get a comprehensive financing plan.