72% of all M&A Transactions Undertaken to Grow Market Share
by Mark Edwards
As the Software Tech market continues to mature and evolve, competition for market share and thus, profit margins, becomes increasingly aggressive. There are fewer opportunities offering high rates of return via organic business growth. Against this backdrop, studies have shown that 72% of M&A transactions are undertaken with the aim of extending market share. The M&A route is a far quicker and much lower risk alternative to attempting to develop a comparable, significant position in a new region or market, through internal growth.
A large proportion of acquisitions are complementary expansions, aligned to the acquiring company’s existing business, services or products. This too, has proven a far less risky proposition than venturing further afield into unfamiliar territory.
If you have made the decision to acquire as part of your growth strategy, have you integrated that decision into your company business plan? If it is part of your business plan, then it is something you need to make happen and, in that case, there are some important factors you will need to consider;
- Do you have a timeframe for this to happen, with agreed and communicated actions? If not, it is simply wishful thinking.
- How long have you been looking?
- What is your previous success record in M&A?
- If you have not been entirely successful with past acquisitions, what are you going to do differently this time? If you don’t change your actions, why should the outcome be any different?
- How do you know if you are seeing the full landscape of opportunities within your area of focus?
Have you considered the following?
- “In three years’ time, what will the acquisition have achieved for you?”
- What are the key criteria for your ideal acquisition
- Are the above criteria reflected in your qualification process?
- Are you being too passive in your M&A search?
- Within your company, who will be involved in the M&A process?
- How much of their time will it absorb?
- What would they have been doing if they weren’t involved with M&A?
- What impact will that have on your business?
- What is the optimal deal structure for your company?
I have seen far too many businesses pay lip service to the fact that they intend to grow via acquisition, yet they sit passively, sifting through endless, so-called “opportunities” that happen to drop onto their desk.
If you are serious about making a success of acquisition and it is part of your business plan, then you MUST be proactive.