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:
- Access to existing clients
- Access to Intellectual property or technologies
- Access to specialized skills
- Access to distribution channels
- Elimination of overheads such as accounting, administration, rent, etc.
- Increased utilization of production facilities
- Reduction in marketing and sales costs
- Additional products to sell to existing clients
- Diversification to reduce risk
- Improved use of salesforce
- Reduced travel costs
- Growth to increase appeal to Private Equity Groups
- Increased multiple on company sale based upon higher revenue
- Economies of scale
- Greater purchasing power
- Greater control of supply channel
- Enhanced market position or reputation
- Eliminate competition to increase margin and market share
- To satisfy clients’ need without risking exposure to competitors
- Reduce transportation costs
Does this give you a different perspective on your business?