Business acquisitions happen in many ways.  In general, they can either be the result of an opportunity that happens to come the buyer’s way or they can be the result of a well thought-out, long-range strategy for growing a business with strategic acquisitions.

You might think that the most successful acquisitions result from a well-developed strategy, but that it isn’t always the case.  In order to execute an acquisition strategy, there have to be business owners willing to sell their businesses, a phenomenon which is impacted by many variables and cannot really be controlled by an acquiror. What is the case is that business owners who complete successful acquisitions do not forget about addressing and perhaps re-evaluating the business’s long-term strategies in light of business acquisition opportunities that do arise.  In addition, companies that have a strategic interest in acquisitions must be ready to act when opportunities do present themselves.

After completing a strategic analysis of your business, including its strengths, weaknesses, opportunities and threats, acquisitions can be considered as a way to capitalize on strengths, address weaknesses, exploit opportunities and a defend against threats.  In many ways, then, acquisitions can be a key business strategy.

The key strategic reasons for considering acquisitions include survival, defense, growth and profitability.

Survival.  Survival is a key business objective.  An acquisition is sometimes made to address an issue that threatens the survivability of a business.  Some of the reasons that an acquisition might contribute to survivability include improving the business’s competitive standing, increasing the depth of management talent, reaching critical mass and profitability.

Defense.  Acquisitions can fulfill the objective of defense.  In its simplest sense, it may be an appropriate to make an acquisition to keep a competitor from making the acquisition and gaining a competitive advantage.

Growth.  Acquisitions can be an approach to achieving the growth objectives of the acquiring business.  When organic growth slows or becomes unsustainable, acquisitions can help fill the gap.

Profitability. Acquisitions can be made for the purpose of enhancing the short-term or long-term profitability of the business.   Short-term profitability improvement can come from allowing the business to reach critical mass – a level at which necessary overhead and marketing expenses can be spread over a larger revenue base, improving margins.  Long-term profitability enhancement can come from synergies that may take longer to realize, including such synergies as revenue enhancement from cross-selling and leveraging buying power with suppliers.

Beyond the four key strategic reasons for considering acquisitions, acquisitions can be a realistic way for a business to:

* Increase its market share.

* Expand its product line.

* Increase its territorial reach.

* Eliminate a competitor.

* Add one or more desirable locations.

* Add management depth or key employees.

* Create an opportunity for cross-selling.

* Create a more sustainable business

Even if a business is considering an acquisition primarily because the “opportunity happens to come its way,” it is wise for an acquirer to address what strategic objectives will be addressed through a potential acquisition along with what the potential impact may be of walking away from a strategic acquisition opportunity.

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