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STRATEGIC BUYER
Of the millions of companies in America, most are small businesses—say, with fewer than 100 employees. For the relatively few businesses that grow into midsize or large corporations, M&A is often a key growth driver. (Which isn't to downplay the roles of talented management, top-notch products, dedicated workers, and so on.)
Yet, oddly enough, more companies than not still ignore the benefits of M&A. This is a serious oversight, a mistake I hope you don't make.
Let's take a thumbnail example. Suppose your company has sales of $5 million and a 20% annual growth rate. Thus, at this rate, it will take several years to double your sales. Now, suppose you buy a competitor that also has $5 million in sales. Now, you've instantly doubled the size of your company. What's more, there is duplication with both companies, in terms of the sales force, administration, and executive officers. As a result, you are able to realize cost savings of $1 million, thus making the combined company more profitable.
There are many excellent reasons for making a strategic acquisition. The following sections cover the primary ones, but there are literally dozens of other perfectly sound rationales for acquiring another business. Bear in mind that these motivations can apply to companies of every size and type, from small, family-run businesses to megacorporations.
