With so many companies owned by baby boomers, it can be tempting to grow through acquisition. Especially if your company operates in a highly competitive market, why not eliminate your competition by buying them out? Pause first before you do that.
Take the example of internet marketing. Internet marketing companies seem to be on a buying (acquisition) frenzy these days. It’s a busy, busy space with thousands (or is it millions?) of competitors. In too many cases, the acquirers hadn’t made basic strategic decisions and their companies are really hectic with too little growth in net profits.
Imagine that your internet marketing company has decided to become the one-stop shop for one (or two complementary) industry. Whether it’s hosting services, website design, search engine optimization, social media campaigns, or online audio and video broadcasts, you want to be the “go to” player for that industry.
You have opportunities to acquire a few smaller web hosting companies that happen serve a few up-and-coming clients within your industry space, and you also have a friend who can bring a few video production houses to the acquisition table. It’s tempting to move ahead with the acquisitions, right?
Remember that your major strategies are vertical integration and industry specialization. Even if some great talent comes with the acquisitions of the smaller firms, serving a diverse customer base would distract your firm from its focus on the one industry.
Maybe you should consider an asset purchase instead of an acquisition. The owners of the web hosting and video production companies are open to selling their firms for a reason. They could have IRS leans, tired employees, old technology, or slow response times.
Better yet, consider stepping up your investment in your own sales force. Which competitors are serving the key industry clients you want? Where do those competitors fall short? Why would your vertical integration (soup-to-nuts/one-stop shop) approach be more effective? Easier? Faster?
Who are the star account executives serving your target industry? Are they stuck working for Presidents/CEOs who have taken a conservative, lay low, wait and see approach during this economy? What could you do to attract those star performers to help drive profitable growth of your vertically integrated industry specialized firm?