A successful buy and build strategy can play a huge part in business growth and development. Acquiring the right business can be a challenge but it’s essential to have a strict and rigorous approach in place to ensure only the best and most suited businesses are considered.
Here at Babble, our acquisitions have proved successful due to our strategy of finding high-quality businesses to invest in. A successful acquisition is heavily dependent on the standard of the company pre-acquisition, which we can bolster further with an appropriate and well-considered approach.
A set criterion should be enforced to ensure each acquisition meets agreed standards. Initially, I would recommend that business leaders consider the business’s current earnings, the continued costs to serve its clients, and the costs to grow the business and build on its success. If the business fits this framework, you can then dig deeper into the finer details, asking:
∙ Is there already a good quality of revenue?
∙ What is the customer base of the existing company?
∙ Do you genuinely like the people? (Everyone knows that good people make a good business).
Many business leaders may see the current climate of the pandemic as a great opportunity to scoop up some undervalued businesses, but it’s important to carefully consider all aspects. Why would you want a cheap deal only to acquire a business that can’t weather all storms? It’s vital to only consider investments that have gained a higher value – this improved value stands as proof of their quality and resilience. It’s essential to focus on companies that make money without additional input – using the acquisition as a platform for organic growth, incorporating new technologies and private equity to accelerate the business.
Not to be ignored, strong employees are a crucial asset – good quality talent can add instant value to investments. Business leaders should try to recruit people with skills and talents that the business does not already have. It is important for business leaders to give employees a space to grow. If you want people to stick around, you’ve got to allow employees to take the reins – that’s when you’ll see good results.
The acquisition process is an ever-changing and flexible one. It might seem that there are few investments which fit the criteria, but there are more than you think. The difficulty lies in finding them – so it’s key to always be on the lookout and ready to move quickly. Finally, don’t forget that each acquisition is a chance to learn. Lean on those that particularly succeeded and adapt to new economic environments to keep yourself at the top of the game.