Are you contemplating buying a competitor or a complementary business? Take the time to carefully define your strategy while considering the market and the objectives you want to achieve.

There are always risks to acquiring a business, which is why, before you start, you need to analyze market developments and take account of numerous factors that can impact the transaction’s success. These include:

• The market’s long-term growth prospects;
• The value created;
• The competence of management and its employees;
• The presence of key employees;
• The average seniority of employees;
• Potential synergies with your business;
• The target’s profitability history;
• The target’s debt level;
• The level of debt required for the acquisition;
• The state of capital assets;
• The target’s positioning in its market.

Above all, your strategy must pinpoint all of your business’s objectives in making an acquisition as well as your medium- and long-term goals.

What do you want to achieve with this acquisition?

There are many reasons why you might want to buy a business. To properly assess the scope of such a transaction, you must first understand what needs it meets and consider the alternatives.

During the evaluation process, several risks or mitigating factors may be raised. It is important to keep your initial objectives in mind during the analysis to ensure that they are met.

Growth

Business growth can be organic, based on demand and new skills, but acquiring a competitor or complementary business could provide you with an opportunity to enter a new market or increase your market share in a specific territory. Among other things, you could reach a new target clientele, broaden your range of products and services or expand your distribution channel.

If your business has reached and exceeded its break-even point, the contribution margin from the newly acquired volume could further increase your profitability.

Flexibility

You may wish to initiate or complete a vertical integration by acquiring or merging with suppliers or customers in order to increase your organization’s flexibility and competitiveness. For example, this M&A strategy could be an opportunity for you to:

• Acquire talent;
• Access specific expertise;
• Integrate a new clientele;
• Reduce procurement risk;
• Get capital assets or intellectual property that you can use in your current activities.

Cost reductions

In some cases, the purpose of a merger or acquisition may also be to achieve economies of scale by increasing your buying power and reducing your administrative costs.

For example, you can take advantage of a well-established agreement with a supplier or leverage your negotiating power with an existing supplier by increasing your purchasing volume.

What risks should be considered?

The status quo can often lead to a loss of competitiveness and market share in the short to medium term.

In addition to the risks of doing nothing, you should also consider the potential risks of proceeding with an acquisition. Ask yourself if these risks are manageable for your company and if the transaction is “worth the risk”.

Once you have weighed the risks and benefits, you can make an informed choice and prepare to reduce any change impacts.

Poorly evaluated costs or timelines

Quite often, there is a temptation to wear rose-colored glasses when considering the potential savings from synergies in a merger or acquisition. Entrepreneurs may underestimate the time needed to achieve these savings or minimize the value of the upgrade investments.

This may include the training required, the acquisition of missing skills, or the integration of IT systems and streamlining of manufacturing.

It is essential to take the time to evaluate the various possible scenarios, taking into account the resources needed to successfully integrate the operations of the companies involved.

Lower-than-forecast growth

Another risk is that growth may be lower than originally projected. For example, a business merger or acquisition may result in some customers leaving the company. One way to reduce this risk, in addition to a good preliminary assessment, is to plan for new products or services that will generate long-term sales.

There may be a slowdown period before the planned growth occurs. It is wise to include this in your forecast.

Value that is not easy to quantify

When it seems difficult to quantify the value acquisition, for example when buying a company to acquire a competitor’s expertise, the deal can be strengthened by negotiating agreements with key employees.

For example, more and more entrepreneurs are opting to offer a percentage of the company’s shares (e.g., 5% to 10%) to their key employees. This allows employees to build a strong sense of ownership and feel more engaged.

In any case, if you are considering acquiring a strategic value that is not based on financial logic, you need to look beyond the numbers and ask yourself: what is the price of doing nothing? In a consolidating market, staying small without differentiating features will never be a good option to remain competitive.

Finally, before undertaking a merger or acquisition project, you should also assess the risk of a clash of values and corporate cultures. If management styles are at odds, synergies will be slower and buy-in to change much more complex. Your risk of losing employees is also increased in this context. You can reduce these risks by acquiring a company that shares your values.

What is your best strategy?

The indicators are generally positive? Then you also need to assess whether the acquisition is the best way to invest your financial and human resources before taking action.

The important thing in such a process is to ask yourself all the right questions and consider the risks with the broadest possible vision, while thinking of ways to mitigate them.

In addition, financing solutions should be explored in depth to get the most out of a merger or acquisition strategy. In a context of rising interest rates, the impact is magnified, and it is important to obtain a credible financing scenario before making a decision. Our financial advisory experts can assist you in this process and cover any blind spots.

Updated on May 2, 2023

In some industries, the pandemic resulted in increased rather than decreased demand. How do we manage the challenges of a sudden growth?

Rapid growth may or may not be planned. It could be the result of acquisitions, market opportunities (partnerships, new products, etc.) or even caused by a situation out of your control, such as COVID-19, which triggered the demand to explode in certain sectors.

When an organization’s growth is sudden and unplanned, it can have many impacts, particularly on production, distribution, the supply chain, and human and material resources.

As an entrepreneur, you must be equipped to stay the course and anticipate changes.

Expand your vision

When your business grows rapidly, this can be an opportunity to branch out in a new direction and grow your business model. You could choose to develop new products or, conversely, refocus your production on the most profitable or future-oriented products. However, before revising your strategy, it’s important to know the value of your products and services.

You also need to ask yourself what happens next. Growth can continue exponentially or be a temporary trend. As no one can predict the future, assess the different aspects that could influence the growth curve in order to minimize your risks and help you make the right decisions.

• How will your market evolve?
• What are your clients’ medium- and long-term needs?
• What position would you like to occupy in your market?

The answers to these questions will help determine what sets you apart from the competition and what meets the needs of your niche market clients.

To anticipate the future, leaders must be aware of movements in their market and society, and try to expand their vision to get an overall view.

Often, the main concern of entrepreneurs who are experiencing significant growth is to prepare the next orders and get supplies. However, they must also be aware of the long term. Otherwise, they run the risk of not anticipating future elements that could hinder their growth.

They must also gauge their own ability to pursue growth, even if it means slowing down for a bit if this is more reasonable for the longevity of their organization.

Adopt a dynamic strategy

Your strategy must be thoughtful and consistent with your business goals, but it cannot remain static. Your strategic planning must include a regular review and performance indicators that will allow you to judge results and adjust along the way.

Regular strategic meetings will help you continue to make the right choices for achieving your goals. Take breaks to reflect on your issues and any feedback you receive from clients, employees and partners.

Regularly take the pulse of the market to ensure that you are still in line with its evolution and with the needs of your employees and clients. Their feedback will help you make the right partnership choices and take the most promising paths for your business.

Keep your long-term vision in mind while readjusting short-term goals, even if it means reviewing your action priorities.

Plan for valuation methods

You need to have an overview of your production and assess the mechanisms and tools in place to achieve your goals, including human, material and budgetary resources.

Establish an operating framework and specific procedures and control methods. Clearly define the roles and responsibilities of each person. Otherwise, you run the risk of exceeding costs, ending up with a lower quality product/service, or surplus, or deviating from your objectives along the way.

Integrate technology into your strategic plan

Nowadays, performance and technology go hand in hand. To achieve its strategic objectives and sustain its growth, an organization must include a digital transformation component in its plan.

This is what will allow you to optimize processes and bolster quick and accurate decision-making, with more precise anticipated results.

Analytics and business intelligence tools can help you plan for operational needs and meet customer demand efficiently.

Furthermore, growth is often hindered by a shortage of labour. Technology is one way to overcome this barrier, as automating certain tasks frees up staff to take on value-added roles.

However, the tools you have in place and those you plan to acquire must align with the long-term strategic vision and reflect the evolution that is underway.

If your business is facing sudden growth, it is even more important to take a step back to see the big picture. A digital transformation audit will allow you to take stock and implement a plan that fits your situation.

To meet your immediate needs, the first step of the plan will prioritize the most profitable solutions for you in the short term. However, these solutions will be integrated into a set of changes spread out over a period of three to five years, since this is a progressive investment that aims to ensure the longevity of your business and achievement of your objectives.

All teams, in every department of the company (including the IT team), play a role in the changes underway. It is important that everyone understand the company’s strategic vision and contribute to the implementation of the action plan and its success.

Know your break-even point

The right tools can help you be more efficient. An effective enterprise resource planning (ERP) system will give you an accurate picture of inventory, cash flows and open orders, and provide you with useful data on your clients and suppliers.

You need to have a clear picture of your costs and understand where your profitability lies in order to calculate your break-even point.

There are many questions to consider, such as:

• Do you have the right system for managing an increased number of requests per day?
• Should you re-evaluate your agreement with certain providers taking into account the volume of products to be offered (e.g., get a volume discount)?
• Should your price be set according to the market share you want to capture?
• Should you reinvest profits into automation?
• Do you benefit from focusing on a single product to increase production capacity or would it be better to expand your product line?

Having a competent CFO is crucial, as he or she will be responsible for ensuring that all clients are charged the right price, all suppliers are paid and that cash flows are well managed.

Your decisions should not only be based on your financial statements. You need to know the profitability of your products and your market and stay focused on the business’s growth objectives.

Assess the new skills needed

As a business grows, it may require more manpower, but you may also want to review the skill profiles you need. New needs may require a different type of leadership, for example.

In the context of change, the most sought-after qualities in employees are agility and versatility. It is essential that newcomers buy into your business culture to help it grow.

When growth is rapid, managers may need to outsource work to meet short-term demand. You will have to prepare and structure your organization’s foundation in order to get the talent you need for the long term.

Include a health component in your analysis

Nowadays, we can no longer afford to neglect the health of employees and managers. This factor carries a lot of weight when it comes to making choices. Not only do we need to consider the resources we have in place, but we also need to prevent burnout, which could otherwise lead to absenteeism and ultimately productivity issues.

Involve your employees in the steps leading to your evolution. Open the dialogue with your staff, be transparent. Communicate with them so that they feel part of the changes, remain engaged and work together in the same direction.

Sudden growth is a source of uncertainty. You need to be prepared for everything, have a long-term vision and be flexible in order to adapt quickly. To do this, effective tools and competent leaders will contribute to your success.

Updated on September 21, 2023

Businesses launch many projects each year. Properly planning each project will foster its success.

Is your organization planning on expanding operations? Does it want to make an acquisition? Does it need to implement a digital transformation or make changes to redirect its business model? It’s important to know your objectives and assess the impacts of each project in order to prepare. Here are essential steps for efficient project management.

1. Properly determine the objectives targeted by each project

Before anything, you must ensure that the project that you want to carry out will meet part of the objectives you’ve prioritized in your strategic business plan. As there could be many possible solutions, is this project the most appropriate and is it the right time to make it happen?

• How will the project’s content provide a winning solution?
• Will completing this project help meet various needs within the organization?
• To what extent does it align with and where does it rank in the strategic plan?
• What resources are required within the organization to carry out the project?

2. Setting the project’s expected results

Prior to starting, you must plan for concrete, precise measures that will enable you to confirm along the way that the project will yield the expected results. Make sure to:

• Thoroughly define three or four of the project’s measurable performance indicators;
• Have management or the Board of Directors validate these performance targets;
• Develop the project taking the indicators into account.

3. Determine the risks and restrictions

From the get-go, picture possible obstacles in order to minimize their impacts, for all aspects of the project:

• The required timelines before completing the project;
• The level of resources required to define and implement the project;
• Foreseeable impacts on the organization;
• Human resources;
• Changes in the market;
• The necessary technologies;
• Etc.

4. Plan the project

Each step is important and must be carried out in the right order. Before starting, you must plan for each step. Don’t leave anything to chance. Take an overall look at the required items, then determine their level of importance and what needs to be prioritized. Take the time to:

• Detail all activities needed to carry out the project;
• Determine the human, financial and technological resources that will be required;
• Highlight the “critical path”, the activities essential to the success of the project and the timetable;
• Choose how the project will be carried out (project manager, level of involvement and consultation with the team, etc.);
• Take a step back when developing the project (to avoid hasty projects);
• Analyze the possible organizational impacts of the project (minor or major) within the organization as well as its ability to undertake it.

5. Select what assistance is available, based on your needs

You need to assess which resources are available, internal or external, that you could obtain to support you during the completion of the project:

• Which organizations or professionals could provide support during the project?
• Which financial assistance programs could apply to the project?
• Define, as needed, a canvassing or network plan to make it easier to complete the project.

6. Validate the eligibility to financial assistance programs

Financial assistance is not obtained automatically. You must take into account the terms and conditions, assess whether your business respects the eligibility criteria, and, as applicable, get help from professionals during your application to ensure that you meet all of the conditions and adequately highlight your project and returns for your business. Make sure to:

• Take the following criteria into account: eligible clients, appreciation criteria, priority criteria;
• Prepare a structure request that stands out;
• Call on the services of professionals or experts in the field for major projects.

7. Carry out the project

Don’t ease up on your vigilance once the project has begun. Each step is important and you must pay attention to all details while completing it. You must, in particular:

• Ensure the organization’s level of commitment at project start-up (change management is a must);
• Be thorough and disciplined to meet the expected deadline and performance targets;
• Keep the momentum going when carrying out the project through regular and adequate communications;
• Plan an evaluation activity once the project is finished in order to determine the highlights and lowlights, and get back on track if needed for other steps or for the next project.

Nothing can be left to chance when setting up projects. The more prepared and organized you are, the higher the chances of success for your business.

For support throughout the process, don’t hesitate to contact a team of competent professionals.

This article was written with Serge Plourde.