Richmond Business Broker: Buy Your Competition

Richmond Business Broker: Buy Your Competition

-------------------------------------

Acquisition tips from a Richmond business broker.

What better way is there to beat your competitor than buying them? There are several advantages to buying out the competition, an acquisition move that can transform your business. Before you make that step consider both the many benefits as well as the challenges you might face.

Key Benefits

1. Remove a competitor — If your industry is a highly competitive one, eliminating a key competitor can help your bottom line. You may have tried your hardest to get the upper hand against them, but you’re still battling your competitor for market share. By purchasing a competitor you have one less business to worry about and you also receive an automatic boost in market share.

2. You get new business — Buy out a competitor and the customers you want go with the business. Certainly, there is a chance that some will move on to yet another competitor, but if they were happy with their service before and you can keep that service level constant when moving forward, most will be happy to stay.

3. Your business can negotiate from greater strength — When you take over a competitor, the merged entity is larger and better able to negotiate from a position of strength. You can use your expanded business model to negotiate better contracts with suppliers and pass at least some of those savings on to your customers.

4. Enjoy economies of scale — It isn’t just your purchasing power that will benefit from an acquisition. Your entire operation can run more efficiently if the merger is done right. You will acquire customer lists, eliminate redundancies, improve marketing and likely run your combined business with fewer people.

Important Challenges

1. A competitor may not be a cultural fit — The way that your company does business may be far different from the way a competitor runs her business. For instance, your business may have a strong top down hierarchy, while your intended acquisition may have a horizontal workflow. You stand to lose key people that thrive in a less restrictive environment unless you somehow find a way to bridge that divide.

2. A new market may be tough to swallow — You and your competitor may overlap several markets. Just as easily, your intended acquisition target may serve a market that is new to you. If that market does not fit in with your growth plans, you may have to cut that market loose or sell it to another competitor.

3. An aged infrastructure may need to be updated — Your competitor has been doing well, but a problem is looming: the business owns several outdated manufacturing plants and related facilities or desperately needs to update its equipment. This is a cost that will have to be covered and could be more of a headache than it is worth. The transition to bring the merged entity up to speed may be a long and daunting one.

4. Buy outs can be expensive — To make your acquisition happen, you may have to eliminate competing upper management, particularly if there are redundancies in place. Do not think for a moment that management will recommend the acquisition to shareholders if their jobs are on the line and your compensation for them is not enough. You may find yourself providing multiple golden parachutes that can cost you much money.

Acquisition Considerations

Work with your Richmond business broker or other broker to help you navigate the acquisition process. Ask your broker for his opinion of the deal. Ultimately, the decision is yours and the due diligence must be handled by you. Do not rush the process, but do consider what your merged business will look like following the acquisition.

See AlsoEstablishing the Price Level for Your Company

-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------

planning photos forms guide

Helpful article? Leave us a quick comment below.
And please share this article within your social networks.

twitter facebook google+ pinterest
Categories: Business Brokerage

About Author