The best organizations of all sizes have their eyes on potential acquisitions, even when an acquisition seems unlikely or unfamiliar, given the enterprise’s history.
That’s because they know that understanding why an acquisition would make sense actually clarifies their existing strategy.
More specifically, thinking through what strategic reason most justifies why the organization should consider an acquisition clarifies what is missing or needs to be strengthened in the existing strategy.
Here are the 10 Strategic Reasons Why an Enterprise Should Consider an Acquisition:
- Market Strategy: to expand the existing product or service set to provide access to new markets and customers to drive growth
- Market Share Strategy: to help the enterprise increase its market share quickly
- Diversification Strategy: to diversify their product or service offerings to reduce risk
- Technology Strategy: to provide new technology, patents, or skilled experts that are currently lacking
- Strategic Assets Strategy: to quickly possess value resources such as intellectual property, branding, and distribution channels to strengthen the enterprise’s position
- Economies of Scale Strategy: to merge operations to reduce costs, increase bargaining power with suppliers, or create shared infrastructure
- Synergistic Strategy: to combine resources and capabilities to improve profitability
- Geographic Strategy: to allow the enterprise to enter or expand in new geographic markets without the time and resources to do so organically
- Talent Strategy: to bring in key talent and leadership to drive innovation and growth
- Defensive Strategy: to prevent competitors from gaining an advantage or to consolidate their position
Ask the team that IF they were to consider an acquisition target, what would make the quarry most attractive? Which of the strategic reasons above has the most appeal and why?
If the team is most attracted to adding new products or services through acquisition, it suggests the existing set needs to be bolstered.
If the team finds acquiring new talent and leadership most alluring, it indicates the existing talent may need to be developed more aggressively. And so on.
The discussion to rethink the existing strategy catalyzed by this acquisition evaluation can prove highly instructive.
Stop leaving strategic thinking about acquisitions to large and financially powerful organizations. Use a discussion of acquisition to further clarify your organization’s existing strategy.
Good targets serve many purposes.
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