Whether you currently operate a business or are looking to start one, a business acquisition can be an appealing prospect.
Acquisitions and mergers are a common practice in the business world and can be extremely beneficial. However, they can easily go sour if gone about the wrong way.
So before you rush out to acquire a new business, take some time to educate yourself on the pros and cons of business acquisition. Read on to learn more!
Pros of Business Acquisition
Acquiring a business is a great way to expedite business growth. Generally, acquisitions are done by an existing company, but it is possible to buy an existing business when you are just getting started.
Let’s take a look at some of the good things about acquiring a business.
Faster Growth
If you are looking to expand your business, a business acquisition can be a great route to instant growth. Rather than having to build your business from scratch, think of business acquisition as a turnkey solution for expansion.
Increased Resources
Acquiring an existing business also means acquiring its resources. Whether this is customer leads, relationships with vendors, or access to more finances, this is generally a net positive outcome of business acquisition.
Market Diversification
Ideally, you want to acquire a business that has existing synergy with your own. However, that does not mean that you necessarily have to be in the exact same industry niche.
Acquiring a new business that synergizes with your existing one while adding a new market share can be an excellent way to diversify your business portfolio.
Acquire New Talent
If the existing business you are purchasing comes with skilled, trained, and talented staff, this is an excellent bonus for your acquisition. Additionally, this new talent may open up ideas and opportunities you have never seen before.
Cons of Business Acquisition
While there are many upsides to business acquisition, there are also several drawbacks. These drawbacks vary from business to business but are important considerations you should make.
High Costs
One of the largest downsides to a business acquisition is the high costs associated with it. This includes legal fees as well as the costs of buying the business itself.
You may have unforeseen costs such as paying severance pay. Keep your accounting under close scrutiny during the acquisition process.
Culture Clash and Other Issues
Sometimes adding another business to your existing one can cause conflict. This can be between old and new staff, or between business philosophies.
Oftentimes these culture clashes result in rounds of hiring and firing, as well as retooling the company structure and operational policies.
Distractions From Normal Operations
Even the best acquisitions and mergers can cause distractions. Be prepared for an acquisition to take up a lot of time and energy as it occurs. The more you prepare, the better off you will be.
Is a Business Acquisition Right For You?
Ultimately, it is up to you to decide if a business acquisition is a good move. Consider your long-term business goals and whether an acquisition will fit into them. With enough planning and foresight, an acquisition can be an excellent decision.
For more helpful articles on business and finance, be sure to check out the “Business” section of our blog. Feel free to contact us at any time with any questions or comments you may have.
