Although there are several ways to expand your business, mergers and acquisitions come at the top of the list. Notably, very few enterprises get to the top of the curve without conducting one or more mergers and acquisitions.
The relevance of acquisitions in expansions is explainable by the many ambitious firms that put up professional teams whose role is to explore potential acquisitions. If done well and thoughtfully, a suitable merger and acquisition strategy comes with outstanding benefits. Aubrey Ferrao is an example of an entrepreneur with a successful history of mergers.
6 Benefits of Mergers and Acquisitions for Business Expansions
Economies of Scope
There isn’t a single expansion method that brings economies of scope to your business, as mergers and acquisitions do. Of course, even organic growth, which is by far the safest, does not come close when it comes to improving your scope. Facebook, for example, immensely improved its scope after completing the acquisition of WhatsApp and Instagram. Economies of scope enable businesses to tap into larger client bases.
Economies of Scale
Arguably, the most significant reason for M&As lies in boosting economies of scale. It gives your business extended access to capital and better bargaining power with prospective partners and distributors. Also, effective mergers guarantee higher volumes at lower costs. Undoubtedly, more prominent companies enjoy advantages that their smaller counterparts cannot enjoy.
Increased Market Share
You can drastically increase your market share with a sound acquisition strategy. For example, Fiddler’s Creek golf Aubrey Ferraro boosted his market share by acquiring Pelican Bay Property. A geographical footprint is of great importance when seeking acquisitions. You can aim to increase your market share within your location or desire to create and maintain a market share in a new area.
Access to Fresh Talent and Expertise
You cannot downplay the significance of fresh talent you will bring on board after a successful acquisition. Ideally, many purchases come along with everything the business had, including staff. Carrying out new recruitment for a full-fledged branch is challenging, costly, and time-consuming. But it helps a great deal if you can acquire a team of qualified, talented, and experienced staff in one go.
Faster Way to Expand
While organic expansion strategy is safer and more stable, it can take several years to achieve your goal. However, an acquisition is a faster way of achieving your goal of increasing your scope and scale and transforming your expansion mission from a long-term objective to a short-term one. If you put your eyes out for possible risks, you will surely come up with a bigger and more stable company in no time.
Creating a synergy implies bringing together two or more businesses to form a stronger entity. The two businesses complement each other and can command better power and more remarkable performance. It would take you a long time to achieve that organically.
There are more advantages of considering acquisitions and mergers. But from the six benefits highlighted above, you can make up your mind on whether your business needs a merger or not. If done correctly, acquisitions can be very beneficial for your company.