Acquisition is a tool for growth not a strategy itself

Many entrepreneurs and management leaders have growth on their minds almost every day.

They ask themselves, what markets should I enter? What services do I need to offer to differentiate my company? Should I embrace specialisation? What services do my best customers need tomorrow? How can I attract new customers?

All of those questions are really components of what is a corporate strategy.

And it is that corporate strategy that then drives how you are going to approach problem-solving and the big decisions to achieve that growth.

So M&A isn’t an effective tool for that.

But the classic way that many company executives tend to approach growth would be to “build, partner and buy”.

But oftentimes it’s not just one of those that is happening, but a combination that can expand or accelerate the others as well.

For example, if we consider the “build” method, you may wish to invest in your go-to-market strategy, which will require an investment in a sales team.

You may already have a sales team that is focused on one geography, but perhaps you need to invest in another geography to expand what you can go after. 

Or you may need to hire domain expertise if you are thinking about going into a new vertical where the details of that are very critical in terms of how you’re going to build the workflows to deliver the level of service and quality that is required of customers in that vertical.

From a “partner” perspective, perhaps you are looking at cross-sell opportunities where there are complimentary services that can be delivered with a partner where you’re not competing, but both of you have an opportunity to create customer stickiness.

Or it might be just a classic way to close a gap in what you’re able to offer to the marketplace.

Finally, considering the “buy” method of acquiring companies, again you are looking to amplify or accelerate what you are already going towards in an organic way.

But you have an opportunity to acquire a company that’s going to get you there a lot faster or more efficiently than what you could do on your own through organic growth.

According to Tuyen Ho, who leads corporate development and legal operations for Welocalize, for M&A to be effective, it has to very much align and be informed by a corporate strategy.

“If we just take a step back and think about it for a minute, there are about 25,000 LSPs that have been identified in our industry,” Tuyen says. 

“According to CSA research, the smallest of the top 100 have about 15 people and the biggest of the top 100 have about 16,000 people.

“So trying to perform an acquisition without a corporate strategy would be a very scattered way to approach that voluminous list of wonderful companies out there that can do something for your own growth efforts.”

If you want to know more about this area, visit Lion People Global’s website where you can watch back our M&A Talks series of videos and fill out a questionnaire that entitles you to one hour’s free consultation on getting a LSP or language tech business ready for sale.