Fiscal Fitness: 20 Reasons for Mid-Size Companies to Acquire Smaller Firms

In a recent 2015 post, I noted that more mid-sized businesses in the Canadian market are turning to complementary acquisitions of smaller firms with fold-ins or add-ons that allow the buyer to add on the revenue of the acquisition without the costs the seller (and their smaller business) had.

As we enter the New Year with renewed resolve and resolutions, I’ve been asked to say more about these financial benefits. Think of them as goals for fiscal fitness!

Here are some 20 ways companies acquiring smaller firms reduce costs and gain operational efficiencies:

  1. Access to existing clients
  2. Access to Intellectual property or technologies
  3. Access to specialized skills
  4. Access to distribution channels
  5. Elimination of overheads such as accounting, administration, rent, etc.
  6. Increased utilization of production facilities
  7. Reduction in marketing and sales costs
  8. Additional products to sell to existing clients
  9. Diversification to reduce risk
  10. Improved use of salesforce
  11. Reduced travel costs
  12. Growth to increase appeal to Private Equity Groups
  13. Increased multiple on company sale based upon higher revenue
  14. Economies of scale
  15. Greater purchasing power
  16. Greater control of supply channel
  17. Enhanced market position or reputation
  18. Eliminate competition to increase margin and market share
  19. To satisfy clients’ need without risking exposure to competitors
  20. Reduce transportation costs

Does this give you a different perspective on your business?

Want to learn ways to increase its value before you sell?

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