BUSINESS GROWTH to understand a buyer ’ s plans for your employees early in a transaction . With add-on acquisitions — particularly if plans include merging the employee bases post-closing — jobs might be eliminated or benefit plans could change .
Regardless of whether the buyer is viewing your company as a potential platform or add-on investment , the qualities of the company likely remain the same . Buyers in either case typically look for a more diversified customer base , past financial performance , and future growth paths . The due diligence process will also look similar in both cases , which involves a heavy lift from you to provide all of the requested data and explanations . The process could be more streamlined if the buyer is a strategic buyer ( e . g ., a larger landscape company ), as they already have a baseline level of expertise in the landscape industry . Consider all the pros and cons of sharing information if the buyer is also your competitor .
Acquiring a company
Rather than being acquired , your company may be in a position to acquire another business . Acquisition can boost your revenue instantly if the add-on company brings new customers , unlocks new sales channels , adds new products or services , or expands your geographic footprint . For example , a landscape enhancement company may look to acquire a landscape maintenance company to access more recurring revenue . Or a company specializing in vegetation management in Montana may look to acquire a company in a warmer climate to take advantage of their usual winter lull . Cross-selling or upselling opportunities can also increase revenue . The diversification of revenue is an added boost here , reducing your company ’ s reliance on historic customers . In some cases , you may want to incorporate another company ’ s technical capabilities , patents or even equipment to spur further growth .
From a cost perspective , combining two or more companies can result in overall cost savings through economies of scale . This can be achieved through merging back-office functions , leveraging internal sales and marketing resources rather than outsourcing , or through more favorable pricing due to improved negotiating positions with suppliers . Some owners find that integrating parts of their supply chain into the company — such as purchasing a smaller but key product supplier — also creates cost efficiencies .
First , define exactly what you ’ re looking to acquire . What are your goals for the transaction ? Is it to gain more equipment ? Are you looking to add specific customers or channels ? What is the target size or geography ? Be specific as to what you want to buy and what you don ’ t want to buy .
Once you have a clear idea of what you ’ re looking for , it ’ s time to actually find the company you will acquire . You may choose to hire an investment bank or broker to identify and reach out to targets . If you have a capital partner , they may have the resources to lead these efforts . You can look at your competitors or others in your supply chain or ecosystem and gauge their interest in a sale . Networking in your industry and asking for referrals can help you identify potential opportunities . After you ’ ve created and narrowed your target list , you begin the diligence phase .
The diligence for an add-on acquisition is similar to any kind of business sale diligence , though the scope depends on the size . For example , smaller transactions may not engage a third party to conduct a quality of earnings review . During the due diligence phase , dig in and ask the right questions to understand the business , identify potential concerns and confirm that the reasons you wanted to acquire the company in the first place are true . You should assess the company ’ s cultural fit with yours — especially if you will be merging employee bases . Ensure that the company ’ s values and mission fit with yours , and have a plan in place to combine these with minimal friction .
Whether or not you hire an intermediary to lead the search , you ’ ll need advisors to assist with the transaction to protect your company and interests . The most important of these is a good attorney with experience in mergers and acquisitions . Depending on the complexity , you may want to engage a specialized accountant .
Post-closing is an exciting time for both your company and the acquired company , but also one that should be navigated with care . Your messaging to both groups of employees is important , especially if you were competitors . Think about it as “ marketing ” the acquisition or merger to employees , as well as customers and suppliers , with the goal of reassuring all parties that business will be even better than before . Along with the message , you should have an integration plan in place prior to closing the transaction to ensure nothing falls through the cracks . For example , have all benefit plans set up before closing so employees are covered on day one .
Beyond the immediate transition , we recommend implementing a 100- day plan after closing . This plan should include consolidating financials and executing on other operational integration action items . This period can be fragile , so you ’ ll want to keep a sharp eye to ensure your key people and customers are with you and that you ’ ve covered all administrative tasks .
Cole Jackson is senior vice president at Montage Partners . Previously , Jackson was a senior manager at Accenture Strategy , where he worked with clients across industries to improve operations and develop and implement new operating models . Jackson holds a bachelor ’ s degree in Industrial Engineering from the University of Oklahoma and a master ’ s degree in Management Science and Engineering from Stanford University .
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