For many small businesses, including those in the green industry, acquisitions are an efficient and economical way to gain market share, add services and expand their client base. When done right, acquiring complementary and competitive businesses is beneficial for both businesses involved.
Read on to see what mergers and acquisitions firms like CCG Advisors and Prinicipium Group say about expansion opportunities. If merging is on your radar, be sure to weigh the pros and cons first. Here are a few benefits to get you started when considering an acquisition.
Why Grow Through Acquisition
Many new and small green industry businesses have growth as part of their overall business strategy. There are some very good reasons for this, including the fact that growth is a way to create opportunities that attract and retain top talent and growth strategy drives innovation and creates a competitive edge. Businesses can grow organically by adding products and services, expanding into new markets and gaining new customers, which may take planning and time. Acquiring businesses can be a way to achieve those objectives in a shorter time period and with infrastructure already in place rather than creating it.
A disadvantage of relying on organic growth is that it’s usually risky and requires additional resources and investments without any guarantees of the outcomes. While acquisitions can be risky too, when the acquisition target brings recurring revenues and customers that can be easily assimilated into the acquiring company, the risks are less and the rewards are more, and more quickly, than with organic growth.
Mergers Mean Opportunity
In an article written for Lawn&Landscape, CCG Advisors Managing Partner Brian Corbett says that big mergers in the green industry like Valley Crest/Brickman Group create opportunity for privately-held competing businesses. The attrition during and after acquisition, or loss of employees and customers, means local competitors have opportunities to pick up those employees and customers and benefit. Corbett explains that private equity investment in the green industry is another avenue for opportunity created by mergers and acquisitions. He says there are equity firms in the green industry looking for ways to invest, which means in local leaders nationwide.
Corbett also points to the opportunities for learning from big industry mergers, and says that Brickman was able to double their business in just over six months. Compare that to the speed of organic growth of your business and you can see just how much opportunity growth through mergers and acquisitions really creates.
Mergers and Acquisitions Considerations
Jeffrey Scott discusses what green industry owners should consider when planning to buy business in “M&A Considerations” in Landscape Management. Scott, green industry growth and profit maximization expert, says there are a few things that green industry business owners need to consider when they want to grow with acquisitions. Culture fit, financial fit, and position fit are all factors to look at when thinking about buying business.
Scott says culture fit is important when looking at a company to buy. He says to see if the two companies share the same goals, values, and ethics, and recommends interviewing principals as you would prospective employees to evaluate culture match.
Financial fit is as important as culture fit because you’ll be taking on new revenues and expenses. Evaluate direct costs, equipment, overhead, and profit margins, as well as contracts if you’ll be buying a client base. Scott advises evaluating the clients of the acquisition target to see if they fit your current company’s ideal client profile.
If the acquisition target owner will stay on, evaluate the position fit so you’ll know what that person will be doing in your company after the merger. What are the strengths, what is the work style, and how does it all fit in your organizational chart.
We wish you luck in all of your business decisions, and if you need any tiops on goal-setting, check out our eBook!