Acquisitions: Acquisition strategy as a growth engine

Acquisition Strategy for Acquisitions

Designing a clear and thoughtful acquisition strategy is central to companies looking to grow through business acquisitions. An elaborate acquisition strategy describes how the acquisition process should be conducted and ensures that the acquisition work aligns with the company's long-term goals. This article describes the purpose of establishing an acquisition strategy, the different parts that can be included, and how the work can be carried out efficiently and effectively.

Purpose of an acquisition strategy

The primary purpose of an acquisition strategy is to define why The company wants to grow through acquisitions and how This contributes to its long-term goals. This includes clarifying the specific objectives of acquisitions, such as increasing market share, growing geographically, diversifying product lines, or gaining access to new technologies. A clearly defined acquisition strategy helps companies focus time and resources on the right segments, target companies and opportunities that best fit the company's overall strategy.

Key elements of an acquisition strategy

A well-thought-out acquisition strategy consists of several key components. Here are some of the most central:

1. Purpose: Define the main purpose of business acquisitions and how it contributes to the long-term objectives of the company. Clarify why the company should grow through acquisitions and in what way it is strategically and financially motivated.
2. Acquisition Criteria: Specify the criteria to be applied when evaluating potential acquisition objects. This includes both financial parameters (e.g. revenue, profitability) and strategic parameters (e.g. market position, geographic presence, technological assets).
3. Market Analysis: Map the market and its trends to identify attractive segments and opportunities. This step helps to understand the competitor landscape and identify potential acquisition targets that fit the company's growth goals.
4. Targeted screening: Carries out accurate identification and evaluation of potential acquisition objects. This means developing a list of possible acquisition objects and making a preliminary assessment of how well the acquisition objects meet the established acquisition criteria.
5. Internal processes: Develop effective internal working methods and processes to ensure an efficient and effective acquisition process. This includes defining roles and responsibilities within the acquisition team, as well as developing standardized procedures and processes for both due diligence and integration planning.
6. Follow-up: Develop clear evaluation criteria so that completed acquisitions can be followed up and evaluated in order to be able to learn lessons for future acquisition processes.

How to implement the work on acquisition strategy

Successfully developing and implementing an acquisition strategy requires both a large amount of work together with internal collaboration. Here are some steps to ensure an efficient process:

1. Strategic planning: Start by carrying out a comprehensive strategic planning. This means gathering data and insights about the market, identifying the company's strengths and weaknesses, and determining the long-term objectives of the acquisition.
2. Involvement of key personnel: Include key people from different parts of the company in the planning process to ensure that all perspectives are taken into account and that there is a common understanding and consensus on the acquisition strategy.
3. Development of acquisition criteria: Work together with key people and management to develop specific acquisition criteria. These criteria should be measurable and aligned with the long-term objectives of the company and may, for example, be financial criteria (e.g. EBITDA margin > 10%, revenues >100 MSEK), strategic criteria (e.g. the target company must operate in a certain niche, hold a strong market position, IP rights, etc.), operational criteria (e.g. efficient production processes, strong distribution channels, etc.) or geographical criteria (e.g. presence in a certain part of the country, presence outside Sweden, etc.)
4. Conducting market analysis: Use internal and external resources to conduct a thorough market analysis. Identify key trends, competitors and analyze market growth.
5. Screening of acquisition objects: Create a so-called target list of potential acquisition targets and carry out a preliminary assessment of how they meet the acquisition criteria. Use available data and insights to prioritize the most interesting candidates.
6. Development of internal processes: Develop and implement internal processes and procedures to ensure an efficient acquisition process. This includes developing templates for decision making, due diligence, integration planning, communication plan, and other key areas.

The Benefits of a Well-Formulated Acquisition Strategy

A well-formulated acquisition strategy helps to create a common understanding and direction within the company, which increases the chances of successful acquisitions and long-term growth. In addition, a clear strategy helps mitigate risk and maximize the value of each acquisition by ensuring that all steps of the process are carefully planned and executed.

Different Types of Business Acquisitions

In the field of business acquisitions, there are different types of acquisitions that can be considered depending on the objectives and strategy of the company:

• Share Acquisitions: A stock acquisition involves a buyer acquiring the shares of a company, resulting in the buyer becoming the owner of all or part of the company. By purchasing the shares, the buyer takes over the assets, liabilities, rights and obligations of the company.
• Debt Acquisition: An acquisition in which the buyer acquires specific assets and liabilities from the target company instead of the shares. This can be beneficial when the buyer wants to avoid certain liabilities or obligations that come with a share acquisition, or that a certain part of a company, such as a business area or brand, is to be acquired.

Financing business acquisitions

Financing business acquisitions can be done in several different ways depending on the financial situation of the company and the objectives of the acquisition. Some common methods include:

• Equity: Use of the company's own funds or through a new issue of shares.
• Loans: taking loans from banks or other financial institutions.
• Mezzanine Financing: A hybrid form of financing that combines loans and equity.

Formulating a clear acquisition strategy is a crucial first step for companies looking to grow through acquisitions. By clarifying the purpose of the acquisition, establishing specific acquisition criteria, conducting a thorough market analysis, and developing effective internal processes, companies can ensure that their acquisition strategy is well aligned with their overall business objectives. A well-formulated acquisition strategy helps to create a common understanding and direction, which increases the chances of successful acquisitions and long-term growth.

At FLB Partners, we offer expertise and support throughout the acquisition process, from strategic planning to integration. Contact us today to discuss how we can help your company develop and implement an effective acquisition strategy.