CEO Advisor Newsletter January 2023
Making Successful Acquisitions for Growth
Acquisitions are a great way to accelerate growth and can substantially exceed growth from your organic growth efforts. Completing a bolt-on or small tuck-in acquisition is very doable for companies of all sizes with the right advisory team in place. Completing an acquisition and ensuring its success long-term is the magic formula that eludes too many companies.
The key is having the right team of advisors consisting of an M&A advisor who will initiate and lead the team and work closely with the CEO, a seasoned corporate/transaction attorney and a CPA or tax advisor. The M&A advisor is the liaison between the CEO, attorney and tax advisor. The M&A advisor also does all of the planning, creates a list of target companies, contacts these companies multiple times and tracks all activities, requests initial information, creates and negotiates the Letter of Intent, coordinates the Due Diligence process and assists the CEO through the legal documents with the corporate/transaction attorney by negotiating business issues of the acquisition.
An acquisition creates value through at least one of the following five strategies:
1. Accelerate and expand market access to new products and services2. Improve the performance of the acquired company by building value through efficiencies and economies of scale3. Eliminate competition and excess capacity from your industry4. Acquire management expertise or technologies more quickly or at a lower cost than if they were built in-house5. Create the infrastructure for scalability
Five Acquisition Strategies
Your purpose or strategic rationale for an acquisition should be very clear. The following is additional information on these five strategies.
1. Accelerate and Expand Market Access to New Products and Services
Smaller companies with innovative products have challenges reaching the potential market for their products and services. IBM pursued a roll-up strategy in its software business between 2010 - 2013 when it acquired 43 companies. By pushing the products of these companies through IBM's global sales force, IBM estimated that it was able to accelerate the acquired companies' Revenues as much as 40% in the first two years after each acquisition.
2. Improve the Performance of the Acquired Company
Improving the performance and efficiency of the acquired company is one of the most common strategies to create value. When you acquire a company to improve sales, marketing and its products, as well as, reduce costs and expenses to improve Gross Profit Margins and cash flows, you substantially increase shareholder value. Keep in mind that it is easier to improve the performance of a company with low Gross Profit Margins and low Net Profit Margins than that of a high Gross Profit Margin and high Net Profit Margin company so buying an underperforming company at the right price and terms can be a big win.
3. Eliminate Competition and Excess Capacity From Your Industry As industries mature they typically develop extensive competition and excess capacity. By eliminating competition you also gain market share, increase sales and even expand your products and services. Additionally, you can eliminate downward pricing pressure from less competition and create the opportunity to increase your Gross Profit Margins company wide.
4. Acquire Expertise or Technology Faster or at a Lower Cost
Technology companies acquire other companies that have strong management, expertise or technologies they need to enhance their own sales, marketing, products and services. They can acquire the technology more quickly than developing it themselves, avoid royalty payments on patented technologies, and keep the technology away from competitors. They can also gain valuable expertise in a cohesive team with far more efficiencies than hiring individuals.
5. Create the Infrastructure for Industry-specific Scalability
Creating economies of scale are often a key source of value creation in mergers and acquisitions. Economies of scale can be important in creating value with purchasing power, infrastructure or other areas that can benefit from larger volumes. This can substantially increase Gross Profit Margins, Net Profit Margins and the value of the business.
By focusing on the types of acquisition strategies that have created value for acquirers in the past, CEOs can utilize acquisitions to create substantial value for their owners and shareholders. Negotiations in M&A deals are extremely different from any other negotiations of the day-to-day business world and far more complex than buying or selling real estate. With the right M&A advisor, you will feel completely comfortable pursuing strategic, opportunistic acquisitions.
CEO Advisor, Inc. is an M&A advisor with the expertise and experience to help you through this challenging and exciting process. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370 by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information..
The key is having the right team of advisors consisting of an M&A advisor who will initiate and lead the team and work closely with the CEO, a seasoned corporate/transaction attorney and a CPA or tax advisor. The M&A advisor is the liaison between the CEO, attorney and tax advisor. The M&A advisor also does all of the planning, creates a list of target companies, contacts these companies multiple times and tracks all activities, requests initial information, creates and negotiates the Letter of Intent, coordinates the Due Diligence process and assists the CEO through the legal documents with the corporate/transaction attorney by negotiating business issues of the acquisition.
An acquisition creates value through at least one of the following five strategies:
1. Accelerate and expand market access to new products and services2. Improve the performance of the acquired company by building value through efficiencies and economies of scale3. Eliminate competition and excess capacity from your industry4. Acquire management expertise or technologies more quickly or at a lower cost than if they were built in-house5. Create the infrastructure for scalability
Five Acquisition Strategies
Your purpose or strategic rationale for an acquisition should be very clear. The following is additional information on these five strategies.
1. Accelerate and Expand Market Access to New Products and Services
Smaller companies with innovative products have challenges reaching the potential market for their products and services. IBM pursued a roll-up strategy in its software business between 2010 - 2013 when it acquired 43 companies. By pushing the products of these companies through IBM's global sales force, IBM estimated that it was able to accelerate the acquired companies' Revenues as much as 40% in the first two years after each acquisition.
2. Improve the Performance of the Acquired Company
Improving the performance and efficiency of the acquired company is one of the most common strategies to create value. When you acquire a company to improve sales, marketing and its products, as well as, reduce costs and expenses to improve Gross Profit Margins and cash flows, you substantially increase shareholder value. Keep in mind that it is easier to improve the performance of a company with low Gross Profit Margins and low Net Profit Margins than that of a high Gross Profit Margin and high Net Profit Margin company so buying an underperforming company at the right price and terms can be a big win.
3. Eliminate Competition and Excess Capacity From Your Industry As industries mature they typically develop extensive competition and excess capacity. By eliminating competition you also gain market share, increase sales and even expand your products and services. Additionally, you can eliminate downward pricing pressure from less competition and create the opportunity to increase your Gross Profit Margins company wide.
4. Acquire Expertise or Technology Faster or at a Lower Cost
Technology companies acquire other companies that have strong management, expertise or technologies they need to enhance their own sales, marketing, products and services. They can acquire the technology more quickly than developing it themselves, avoid royalty payments on patented technologies, and keep the technology away from competitors. They can also gain valuable expertise in a cohesive team with far more efficiencies than hiring individuals.
5. Create the Infrastructure for Industry-specific Scalability
Creating economies of scale are often a key source of value creation in mergers and acquisitions. Economies of scale can be important in creating value with purchasing power, infrastructure or other areas that can benefit from larger volumes. This can substantially increase Gross Profit Margins, Net Profit Margins and the value of the business.
By focusing on the types of acquisition strategies that have created value for acquirers in the past, CEOs can utilize acquisitions to create substantial value for their owners and shareholders. Negotiations in M&A deals are extremely different from any other negotiations of the day-to-day business world and far more complex than buying or selling real estate. With the right M&A advisor, you will feel completely comfortable pursuing strategic, opportunistic acquisitions.
CEO Advisor, Inc. is an M&A advisor with the expertise and experience to help you through this challenging and exciting process. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370 by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information..
Planning for Success in 2023
Online Marketing Planning and Execution for 2023 will Maximize Your Opportunity for Success
- Your online marketing strategy can be a major catalyst to your success. Without planning, strategy, well executed marketing campaigns and reporting your company may be foregoing substantial lead generation and sales.
- Proactively focusing on your goals, executing on your online marketing plans, optimizing lead generation, maximizing sales, profits and the value of your business is critical to every company.
- Craig Cooke, former CEO of Rhythm Interactive for over two decades, was a client of CEO Advisor, Inc. for nearly a decade, during which time Rhythm grew, became extremely profitable and was sold by CEO Advisor, Inc. to a large private-equity backed digital agency in New York City.
- Today, Craig Cooke works with CEO Advisor, Inc. as a growth specialist and online strategist to accelerate sales for CEO Advisor, Inc. clients. At Rhythm, Craig advised some of the largest global brands on growth, online strategy and online marketing. As a seasoned executive and CEO of a digital marketing agency for 26 years, Craig is a critical asset in growing businesses to the next level as a valued member of the CEO Advisor, Inc. team.
- CEO Advisor, Inc. works with CEOs, presidents and business owners of small and mid-size companies on growth, strategy, online strategy, funding, mergers and acquisitions, and the key to a successful year is up-front online strategy and planning. This is a tremendous opportunity to gain extremely valuable expertise to grow your business to the next level.
- Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation with Craig Cooke and Mark at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
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