Organic or Acquired Growth?

We all want to grow our companies, increase revenues, breadth of service or product offering, gain access to new customers, new markets, scarce resources (such as hard to find talent, or even funding), increase the bottom line and eventually exit at a premium valuation. But is organic and acquired growth the best root to achieve these objectives and the ultimate end game.

Firstly, you need to figure out what the end game is and why, more importantly when and is everyone aligned to this. We are never surprised to learn from our clients just how many gaps and misinterpretation exists at the most senior levels in companies.

Secondly, can you scale to the levels you aspire to organically within the timescales you have set in order to achieve the exit valuation you are ambitious to achieve?

Then move on to can we partner and get so embedded in a larger go to market partner’s value chain that you gain that additional sales traction to drive your revenues? If you become so embedded and so strategically important, you could actually see this as your potential exit route at that premium valuation.

If you cannot partner for your growth or cannot see the growth being generated from organic client sales, then you need to acquire. Beware!!! Acquisitions are fraught with danger and can do more harm than good.

Remember 1+1 does not always = 2

Searching for the right company and striking at the right time. Best price doesn’t always represent best value or even best fit. Looking at companies who are hurting, under-performing, running out of cash, can be a great source of quick, low cost bolt on to your company but be aware, can you turn them around, slip them in to your structure (including cultural fit), reduce costs and leverage the new additional resource? Not an easy task, but get it right and this is a very cost effective and quick way of buying growth.

Paying a premium for well performing companies in order view should be avoided, as you have no real upside unless there is a real compelling reason to acquire such as taking out your number 1 competitor for market share, or gaining access to their IP , skilled workforce and buying in to a new market.

Either way, active yet discrete search, good pre transition due diligence , a solid business case and more important than anything ensuring that you have a realistic post transaction integration plan with clear ownership and responsibility is key to success.

Also never under estimate the cultural fit, both parties need to be able to work together, share the same goals, morals and values. If not you are in for a torrid time.

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