Pros and Cons of Growing Through Acquisition

Mergers and acquisitions are quickly becoming the fastest and easiest way to increase the size of a company. To make sure we’re speaking the same language, for this article we will be using ‘acquisition’ when referring to one company purchasing another company, be it through shares or assets. The three similar forms of combination that people tend to confuse are acquisition (both companies legally survive), mergers (one company survives), and amalgamations (neither company survives). While there are benefits for each kind of synergy, in this article, we will be discussing the use of acquisition.

PROS

  1. Reduced Entry Barriers
    • When acquiring a known brand and placing it underneath your own, the clientele loyal to the brand are more likely to simply continue with the kid-tested, mother-approved brand rather than change. People are naturally averse to change, and so if you can acquire a company that already has a strong following, you are likely to benefit from much of their hard work.
  2. Increased Portfolio
    • Especially when you are acquiring the portfolio of one of your competitors, the benefits are likely to outweigh the costs. By quickly increasing the size of your portfolio as well as decreasing or negating the size of that particular competitor, your market share will naturally increase, and your brand will see a recognition uptick.
  3. Fresh Ideas and Perspective
    • With some acquisitions come the acquiring of not just the assets, but the staff of a company. Like all types of synergy, there are pros and cons to consider in this as well. However, as we like to focus on the positive here, some of the benefits of acquiring new team members are:
      1. Passion – With new blood in the water comes excitement. Some team members may learn from the experience of others, while some thrive off the stamina they now see alive in the office.
      2. Competency – I know, I know, dare we say this one? But honestly, with new team members can come new competencies you didn’t even know your team was lacking as well as improved competencies that can come simply from the collaboration.
      3. Ideas – Many times complacency can be poison, and comfort within a team, as much as it can be an aid, can be a bane. Spicing things up every now and then by adding new teammates, or even by using an off-site training, or an early morning team exercise can get the brains of your team working in different (better) ways!

CONS

Even though the word ‘cons’ may be a bit strong for this list – the word CHALLENGES may be more appropriate – a wise person once said, “With every pro there is an equal and opposite con” … or something like that.

  1. Culture Clash – Remember those days when it was just you, pouring over the financials and staying up all hours of the night to ensure the success of your small yet thriving business? Well, then you realized you could delegate and cover more ground. And with each person comes a new personality. When acquiring, staff maintained may be coming in feeling ‘less than’ or even ‘more than’, and this can lead to a new culture of conflict.
  2. Miscommunication – When acquiring another company, the other company and your own likely had different end goals, as well as processes for achievement. One way to alleviate miscommunication is in quickly calling together all the staff in order to work toward mutual understanding and bonding. This can lead to improved morale and will positively impact efforts being made.
  3. Duplication – One of the frustrations and fears when a company is undergoing merger or acquisition is… “Am I being replaced?” Along with the influx of new staff may come the same job titles and positions – this is duplication. Owners and managers must instill confidence in their staff during these confusing times, and be diligent in weeding through their current and oncoming prospects, ensuring they choose the best ‘for the future of the company’, rather than simply the best ‘well they’ve been here doing that job for ten years’. This is emotional, and difficult for everyone. It can also lead to decreased profits if not controlled quickly and accurately.

BUT, even with these negatives, Mergers and Acquisitions are still popular way to growth – highly due to the appeal of instant growth. When strategically planned and played out, a deliberately executed acquisition can be one of the best ways for a company to achieve growth.

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