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The reputational benefits of acquisitions

Posted: 06 Aug, 2019

If your business has a comfortable financial footing and is at the point where it is seeking to increase its market share, you may consider a merger or acquisition to achieve this goal. By taking ownership of another business or its assets, you can multiply your share in the market and enhance your reputation, attracting more business, highly skilled workers and a new customer base.  In addition to the financial benefits following your step-up in the hierarchy, the acquisition is a reflection of your stable financial health, expanded capacity and increased authority, writes Emma Jones of BTG Advisory.

An acquisition may be the answer to accelerating growth and spurring the development of your business, helping to hit the next milestone. The reputational benefits attached to an acquisition can help make your name known in a saturated sector and individualise you from the competition. Here are some of the benefits of taking the route of an acquisition:
 

Neutralise the competition

If there is a smaller competitor in the market swallowing a portion of your market share and client base, you may consider acquiring the business. If you have the operational capability, financial ability and industry standing, the business in question may reflect a mutual interest in the idea. If the competitor mirrors your service offering and attracts a similar customer base, the reasons behind a successful acquisition may be countless, offering the ideal stepping stone to promoting the reputation of the business.
 

Acquire your niche service

It is common for large businesses to snap up smaller practices to establish a niche or develop an existing service. By acquiring staff already dedicated to providing a specific service, you can increase the amount of manpower standing behind your strongest service, eventually marketing it as your niche offering.  Sharing your vision through teasers or word of mouth may even help secure an acquisition opportunity. By acquiring a business with already seasoned talent, you can inject your company with a fresh dose of industry knowledge and first-hand experience.
 

Geographically diversify your service

An acquisition can help diversify your national or global coverage, as by concentrating the number of branches catering to postcodes across a specified region, the higher your public exposure and recognition will be. This can also help cater to new geographical areas you haven’t usually ventured across, attracting a new customer base and community of followers.

By having multiple storefronts, you can multiply sales opportunities and brand visibility. As this increases customer demand and confidence in your brand, so does your power to influence. By pooling the resources of the acquiring business and the acquired company, the value of the business and market share can experience a significant uplift.

 

Different types of acquisitions

On a broad level, there are two types of acquisitions which are commonly used. This includes:
 

  • Asset acquisition: Purchasing selected operational assets of the business, excluding liabilities
  • Market acquisition: Purchasing the whole company, including assets and liabilities
     

An asset acquisition can give you the freedom to pick and choose which resources to acquire, typically made up of tangible and intangible assets such as, equipment, patents and licenses. This type of acquisition gives you the ability to cut out liabilities and unwanted assets.

A market acquisition is the purchase of stocks in the company, transferring ownership. This means purchasing the entirety of the business, including assets, liabilities, rights and obligations. A market acquisition allows you to take control of the business, an investment which could bolster the reputation of your brand.

An acquisition can illustrate to the industry and your customer base that you’re an established key player in the field which a large pool of resources and a practical view to increase your market share. As well as the new addition to your business portfolio, an acquisition can strengthen your reputation and help elevate your brand name, pushing it into the next league of industry competition.

Emma Jones is a director at BTG Advisory, the corporate advisory arm of Begbies Traynor Group.


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