Acquisition of a competitor is perhaps one of the most effective and fastest ways to gain market share and momentum. Of course, there are benefits to buying a competitor. First, it will help you get rid of the competition. In addition, it also enables you to gain new employees, customers, and products.
However, before you acquire your competitor and make an offer, you should consider a couple of things first.
From getting business valuation services to evaluating their culture, here are some things to consider.
Assess Their Culture
The acquisition might not be a wise move if the employees and clients of your competitor are accustomed to working with a company whose values significantly differ from yours.
You need to be cautious. A lousy company plus a good company doesn’t necessarily equal a bigger good company. Most of the time, it means the ruination of both businesses.
Loot at their Valuation
There is a huge possibility that the asking price isn’t the expected final price. Instead, most entrepreneurs use the asking price as the jumping-off point.
Because of this, it’s always ideal to hire a professional who can help you with business valuation and ensure you are getting a reasonable price.
Assess Your Motives
Are you trying to acquire the competitor to serve your clients and theirs better? Are you acquiring your competitor to eliminate their brand from the industry? Are you planning to acquire them out of vanity?
You need to evaluate your real motives carefully. If you’re acting out of emotion instead of making your decision based on competitive advantage and numbers, you’re likely making a huge mistake.
Assess Their Motives
Why is your competitor selling his business? Is he planning to retire? Does he have a loved one who is ill? Is your competitor trying to get out before a class action lawsuit arrives?
You must ensure you learn everything you can about the company before making an offer.
Look at Their Employees and Products
Has the business had any turnover of key personnel? You might risk losing the client base you’re paying to acquire if one of their best employees resigns to start a new business.
Thus, assessing their intellectual property, such as trademarks and patents, is vital.
Look at their Customer Mix and Products
Is there an excellent relationship between their clients and their products? Will their clients willingly become your customers? Will you achieve complementary services and products that will enable you to serve your customers and theirs better?
Look at their Numbers
It’s vital to understand what you’re trying to acquire. One of the surest ways to know is to run the numbers. Try to look at historical trends. Many businesses trim back costs and stretch profits to make their business more appealing to buyers.
Are your competitor’s sales showing constant improvements over time? Does the competitor have a consistent cost of sales?
If you’re planning to gain market share and clients, acquiring your competitor can be a wise move. However, you should not do it immediately. You need to go through the process with your eyes wide open.
You must be deliberate and thoughtful and always do your research.