The benefits of an acquisition include:
- Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence. For instance, acquiring a business with good management and process systems could help improve your existing operation.
- Access to capital or new assets. Generally, expanding an existing operation is often less expensive to buy than to build. Buyers look for targets that are marginally profitable and have unused capacity which can be bought at a small premium to net asset value.
- An under performing business. For example, those companies struggling with regional or national growth may find it less expensive to buy an existing business than to expand internally.
- Access to more customers or increased market share. Target businesses may have distribution channels and systems that can be easily integrated.
- Diversification. An acquired business may have new products or services which can be sold through their existing channels.
- Reducing your costs. Operating synergies often drive acquisitions, with an emphasis on shared budgets, increased purchasing power and lower costs. Note: These acquisitions are more likely to fail post closing, due to inefficiencies and customer service issues.
- Reducing the competition. It may be cheaper to acquire new customers by purchasing the company that services them than paying for traditional marketing and sales efforts.
- Accelerating growth. Multiple businesses in the same sector or general location can often combine resources to reduce or eliminate duplicated expenses and increase revenue.