Growth by Acquisition is an exciting way to create value in a company, however, it needs to be recognised for what it is – wholesale organisational change. Growth by acquisition carries a level of risk that must be respected and managed appropriately, requiring a thorough and rigorous process, backed by deliberate strategy.
The rewards of a successful acquisition, are balanced by the substantial level of risk, which often accompany such an activity – the greater the risk, the greater the return. King’s Growth by Acquisition (GBA) program seeks to mitigate this risk, providing a process that develops the acquisition strategy, identifies and engages with a target, providing transaction management throughout the whole process, from initial preparations through to post- acquisition support.
We take a structured approach to the complex activity of growth by acquisition. At King’s we have adapted the philosophy that our job is ‘not to simply deliver a transaction but to deliver a successful acquisition’. There is a subtle but substantial difference between these terms. Almost anyone can deliver a completed transaction, however to navigate the pitfalls of GBA, identify a target, and ensure the acquisition has every chance of meeting its strategic objectives – this requires expertise.
The key driver for implementing the GBA module is to guide you in achieving your acquisition objectives. Our advisors will seek to classify your objectives within the two following broad categories of acquisition:
A Financial Acquisition delivers a return on investment within the acquired entity and typically sees little to no integration into the Purchaser’s existing company. Existing management typically remain with little change except for perhaps at the board level.
For a Strategic Acquisition the return on investment is primarily realised within the acquiring entity. A target is typically acquired for what it can do for the acquiring entity, financially, operationally and strategically. The acquisition is considered primarily a transfer of asset, and/or capability, with the need to meet specific financial benchmarks mostly being a secondary consideration. Strategic Acquisitions are then further separated into the following two categories, a target that either:
- Mitigates or eliminates a risk This sort of acquisition may be undertaken to i.e. de-risk your business model supply, achieve vertical integration, out flank competitors, protect against legislative change, etc.
- Provides opportunity Targets can provide opportunity in many ways but ultimately, they can be classified as enabling revenue opportunities, providing expansion into new markets, removing limitations in scalability, providing access to valuable intellectual property or research and development.