How to grow your business through strategic partnerships, mergers and acquisitions
The world of business thrives on growth and value creation for stakeholders and shareholders alike. The greatest businesses of all time have successfully managed to not only adapt to disruptive changes in the business and macroeconomic environment but also grow and expand in meaningful ways. The right growth strategy depends on a variety of factors unique to your business, its industry and operating environment. Whether it’s growth through a strategic partnership, merger or acquisition, there’s the right growth strategy for you.
Strategic partnerships involve a formal agreement between your business and another party (or parties). Whether it’s a joint venture, equity participation or other mutually beneficial agreement, the outcome serves to boost revenues, reduce costs or access new markets and customers. The strategic partnerships between Uber and Spotify, Redbull and GoPro or Starbucks and major wholesale book retailers offer insight into the plethora of benefits associated with these agreements. Each party benefits from the other’s unique strengths in a certain market. For instance, customers can enjoy a cup of handcrafted coffee while browsing books in a bookstore, or adrenaline-junkies can get a jolt of caffeine-infused Redbull before capturing their adventure on a GoPro camera. In all cases, both companies benefit from a strategic alliance.
Mergers and acquisitions (M&A) involve the consolidation and/or acquisition of companies or assets. While the terms are used interchangeably, they have different meanings. In brief, a merger consists of two companies seeking shareholder approval for the consolidation of their business. In an acquisition, on the other hand, the acquiring company obtains a majority stake in the target company. The end goal is often similar: inorganic growth, which is growth through M&A activity as opposed to revenue-generating activities. Businesses engage in M&A for many reasons. First, it creates synergies by reducing costs and increasing market share. When the strengths and weaknesses of two businesses complement each other, it makes strategic sense to combine the two, eliminate redundant departments and focus on growing your key performance metrics (or KPIs).
In order for any M&A transaction to work, businesses need to get a few things right from the start. It’s critical to arrive at an accurate, reasonable valuation of any business to avoid overpaying for a target company. Similarly, bidding wars are commonplace in M&A. It’s easy to see why: if you happen to spot a valuable company, others will have their eye on it, too. It’s also important to understand the value both parties bring to the table (this is especially important in a merger). Prior to embarking on any M&A transaction, a company (no matter how big or small) will often engage a team of accountants, lawyers and bankers to navigate and execute the transaction.
At Bennett Verby, we pride ourselves as a boutique accounting firm with seasoned expertise to grow your business. Whether you require a business valuation for an M&A transaction, associated tax planning, exit planning, or need assistance with structuring a deal, please contact us to discover the complete range of strategic planning services we can offer you.
What else should I be thinking about?
There’s no ‘one size fits all’ solution for limited company directors. The Government measures that have been released may be useful for you depending on the size and nature of your business.
Here’s a brief list of things you could explore, which we have covered separately:
- Cash flow and payments
- Mortgage holidays
- Deferring income tax and VAT payments
- The Coronavirus Business Interruption Loan Scheme
- HMRC Time to Pay Scheme
- Statutory Sick Pay Relief package for businesses
- Business rates holidays
- The Small Business Grant Scheme
As always, we’re here to help you in these uncertain times. If you need advice about any of the above, speak to us about the ways we can help.