Dec '25 • Tips
VALUE CREATION | STRATEGIC ACQUISITIONS
When analysing a business to buy, its key to look for the post acquisition value creation opportunities.
Here’s 3 comments from market leaders:
KEARNY STUDY "COMPANIES THAT MAKE AT LEAST 1 ACQUISITION PER YEAR HAVE A EQUITY VALUE GROWTH RATE 25% HIGHER THAN THOSE THAT MAKE NO ACQUISITIONS"
BCG Study "strategic acquisitions executed by 91% of private equity have become the most common approach to growing the value of portfolio companies"
KPMG study "acquisitions will be the main source of growth in the next 3 years"
The 3 KEY DRIVERS of creating value through strategic acquisitions are:
1. INCREASE REVENUE
2. LOWER COSTS
3. HIGHER EXIT MULTIPLES
Synergy is a buzz word and gets thrown around very flippantly in my opinion. Look at REAL synergies, its good to ask the team a few questions:
- Is the acquired product/service bought by the same economic buyer?
- Do those buyers have an appetite for the acquired product/service?
- I s the acquired product/service easy to plug into current infrastructure for upsell/cross sell or is training needed?
Be careful not to overestimate synergies. Acquisitions shouldn't dictate your strategy. your strategy should dictate what you acquire.
There are also different types of synergies:
1. Revenue synergies - cross sell/upsell, bundling packages (making the offer more attractive), access to new markets
2. Cost synergies - reduce overheads, greater efficiency, eliminate redundant systems, greater purchasing power
3. Financial synergies - bigger debt capacity, tax benefits, higher exit multiple
4. Knowledge synergies - exchanging best practises, sharing resources etc
Growing through acquisition is a scaling hack when done correctly but it is important to take into account all of the above.
Have a good one.
Dee
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VALUE CREATION | STRATEGIC ACQUISITIONS
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