What type of deal is likely to get you the most growth?
November 27, 2014
Towards the end of July I took part in a webcast with my US colleagues about “Successful M&A integration: looking beyond the here and now”.
One of the topics we explored was how acquisition types have changed over the past three years. During that time we’ve seen more pressure on companies to achieve higher earnings growth, an economy more favourable to doing deals and a shoring up of cash on companies’ balance sheets. This has created a perfect environment for larger deals.
Absorption vs. transformation
But just how do you achieve transformational growth in this environment? You need to look at your company’s expansion and growth strategy. This will influence what type of deal you going do and what type of company you target. Broadly speaking types of deal fall into two categories:
- Absorption deals – buying a similar or complimentary business
- Transformational deals – where you’re acquiring new products, entering new markets, using new channels, acquiring new talent or introducing new processes
By buying a similar or complimentary business it’s likely that you won’t achieve as much growth as if you opt for a transformational deal.
For more on this, watch a brief excerpt from the webcast about what types of deals we’ve been seeing here:
What’s been your experience of levels of growth in absorption vs. transformational deals? To what extent have you satisfied shareholders’ demand for growth with absorption deals? Share your thoughts and experiences below or schedule a meeting if you wish to discuss your situation in confidence.