Business growth through acquisition, mergers and partnerships
Understand the power of partnerships in business and how to use acquisitions, joint ventures and mergers to grow your company.
As well as growing your business organically, you can also expand by joining forces with another business. While this can create problems around decision-making and possible management and staff issues, there can be clear advantages.
Benefits of business cooperation
Successful business cooperation can deliver:
- more resources
- sharing of the managerial load
- larger skills and talent base
- bigger pool of contacts
- increase in markets
- diversification and organic growth using increased resources
- reduced commercial risk
The right partner should complement your core brand and business development goals, so consider carefully the type of partnership you plan to pursue to ensure the best chances of success.
Partnerships and joint ventures
Joint ventures and partnerships can offer both partners significant benefits, including sharing experience, skills, people, equipment and customer bases. Through a partnership or a joint venture arrangement with a complementary, non-competitive business, you may be able to open new markets or improve your offer to existing ones. But it's important to choose your partner carefully.
An agreement or contract defining the terms of the partnership or joint venture is essential and further legal protection is advisable. See how to create a joint venture agreement.
Teaming up should be a win-win situation for both parties. Businesses involved with complementary activities or skills are usually the most appropriate candidates. For example, a group of sole traders - a carpenter, builder and gas installer/electrician - could form a company to:
- increase their credibility in the construction trade
- allow them to bid for larger contracts
- appeal to customers looking for a 'one-stop-shop' service
Find out more about joint ventures and business partnerships.
Mergers and acquisitions
Growth through acquisition or merger is a common tactic used to achieve diversification and market positioning. It can help:
- increase market share
- expand the workforce
- widen the existing service or product offering
- grow revenues
- achieve economies of scale
- reduce costs through shared budgets and greater purchasing power
However, combining two businesses can pose challenges that did not exist before, such as:
- maintaining a presence in multiple markets
- managing a complex product and services portfolio
- retaining a larger and more diverse customer base
- managing more people and operational complexity
Find out more about mergers and acquisitions.
Acquisition and merger may not be suitable business growth strategies for all businesses. They are more suited to established enterprises, as transactions may involve commercial lawyers and considerable legal work.
You should thoroughly plan, research your options and strategically pursue the right type of growth for your business. If you decide that growth through partnerships isn't the right fit for your business, you may want to grow your business organically.