How to Maximise the Value of your Business – Part 4 – Your Strategy

An article by Peter Watson, Prism Corporate Broking

We are like sheep – certainly when it comes to making an acquisition.

Where one goes – others are likely to follow. Movement is often governed in the city boardrooms, yet still percolates down to the SMEs. Recent examples include Cloud Computing, which has driven a large number of deals.

One of the primary drivers for business acquisition is to build scale. This is particularly important in the early stages but can be relevant through all stages of market development. Indeed Alarm Maintenance is one such mature market where there exist very large, serial acquirers such as ADT who have a well-oiled process for mopping up small businesses with a customer base.

Another key driver is the acquisition of capabilities. This can be critical to accelerate market entry, or to provide significant barriers to entry to other players. Buyers are typically prepared to pay more to acquire capabilities than to acquire scale (big generalisation!), and this has driven some fantastical valuations for some early stage technology start-ups.

Formulating a business strategy with half a mind on exit is the name of the game here. How can you ensure that you are “ahead of the curve”? One technology client referred to it as “reading the technology tea leaves” but it’s not just technology that is important, so are customer trends.

Larger companies generally move more slowly – and then scramble to acquire capabilities and scale once the direction of the market is clearer. SMEs can be fleet of foot and so keeping your ear to the ground is an important capability for an owner-manager.