Growth through acquisition: how to successfully purchase a business

Acquiring a business can accelerate an SME’s growth as long as the business leader properly assesses its capacity and prepares the transaction.

Developing new markets, attracting new clients, hiring employees and investing in new facilities can take several months or even years. Therefore, growth through acquisition can be an interesting option for an SME seeking to accelerate its growth.

An acquisition allows you to leverage your existing resources and activities rather than developing everything by yourself. However, before embarking on an acquisition project, you must define its strategic objectives and determine whether your SME has the required resources.

Why should you opt for growth through acquisition?

An acquisition process involves more than increasing your turnover and the size of your business. First and foremost, it must serve a strategic objective.

Depending on your goals, an acquisition could help you to:

• access a new market or expand your client base;
• acquire specific expertise or add a product to your service offer;
• quickly integrate a team of sought-after professionals;
• scale your business at a rate that would otherwise require years of internal growth.

Before seeking a target business, you must ask yourself one question. What should this acquisition contribute to my company? The answer will guide your search process.

Is your SME ready to make an acquisition?

Once you define this goal, the next step is determining whether your SME has the necessary resources to take action. There are two important aspects to consider here.

The first aspect is financial capacity. How much capital can you raise to cover the downpayment and finance the transaction? The second element is operational capacity. Does your organization have the resources needed to handle this growth while continuing its operations?

This analysis is similar to a prequalification process. It allows you to pinpoint the scale of a transaction that your SME can reasonably conclude before investing time and resources in seeking a target.

How do you choose and evaluate the right company?

An organization could perfectly align with your strategic objectives without representing a sound acquisition on a financial level.

The analysis should focus on the company’s value, its performance, and the terms under which the acquisition could be finalized. Any subsequent negotiations will be based on various elements such as the price, payment terms, certain terms of the agreement, and the seller’s potential role during the transition.

How can you finance an acquisition without curbing your growth?

Financing is a particularly challenging issue for small and medium-sized enterprises. Compared to larger companies, SMEs generally face more limited access to capital sources and lenders.

When defining your acquisition structure, you must consider the available resources and the flexibility you need to avoid disrupting operations. Tying up too much of your cash could reduce the financial flexibility required to continue your business activities and develop other projects following the purchase.

Why is integration just as important as acquisition?

Closing a transaction doesn’t mark the end of the process. After acquiring a company, you must fully integrate it and strengthen the synergies previously identified between the two organizations.

For example, these synergies could relate to operations, labour or purchasing. In concrete terms, procuring larger volumes could pave the way for negotiating better conditions with suppliers.

Why should you seek guidance when growing your business through acquisition?

In most cases, SMEs do not have all the expertise required for such a transaction in-house and leaders can struggle to find time for the process while ensuring business continuity. Throughout the transaction, you may require help with evaluating the selected company, structuring the financing, analyzing the tax consequences, reviewing processes, identifying targets and optimizing operations.

Therefore, surrounding yourself with professionals who can support you at every stage of your project is wise. The teams at Raymond Chabot Grant Thornton have all the expertise needed to guide you before, during and after the transaction while working closely with the legal advisors involved in the acquisition.

Are you planning an acquisition to accelerate your business’s growth? Contact us!