There are two types of mergers and acquisitions: financial and strategic. A financial acquisition offers quick solutions to a company’s financial needs. However, a strategic acquisition offers solutions to problems of a different nature – essentially, fundamental problems that hinder the company’s growth. 

As such, a strategic acquisition can offer a wide range of benefits and unlock opportunities that can help drive a business’s growth and expansion. Here is an overview of four ways this can happen: 

1.    Leveraging Synergies 

Synergy refers to two or more entities coming and working together. An acquisition creates opportunities for two types of synergies: cost synergy and revenue synergy. 

Cost synergies involve cutting operating costs by consolidating overlapping operations and resources. It is also worth noting that cost synergies can also boost the company’s bargaining power because of its larger budget. On the other hand, revenue synergies may involve many components, including reducing competition, expending the company’s customer base, and opening up new territories. 

2.    Acquiring Talent & Intellectual Property 



Many companies are struggling with an acute shortage of talented and experienced professionals to fill open positions. This shortage has also been exacerbated by the COVID-19 pandemic, which has triggered mass resignations. 

Acquiring another company is one way of acquiring new talent. Additionally, an acquisition will make your company larger, and larger companies are more appealing to talented employees looking for the best opportunities. 

Acquiring another company also automatically gives you ownership of that company’s Intellectual Property (IP). IP has been described as the new currency for doing business, but it is notoriously difficult and expensive to buy (yes, you can buy Intellectual Property nowadays).

3.    Filling Gaps in Client Listings & Service Offerings 

What happens when things change so drastically that it is almost impossible to keep up? This was the case for most defense contractors after the 9/11 attacks. Companies that couldn’t keep up with the changing rules and regulations were either bought up or shut down. 

A strategic merger and acquisition is an efficient solution to critical gaps in a company’s offerings and client listings. Such an acquisition puts your company in a better position to respond to intense changes in the industry or marketplace.

4.    Adding New Offerings & Entering New Markets 

Google search engine was Alphabet’s most notable source of revenue before Android’s acquisition. However, Alphabet can now sell mobile applications and other related products and accessories to 70% of smartphone users worldwide, thanks to its acquisition of Android. 

As explained earlier under the revenue synergies section, an acquisition creates opportunities for the company to sell a new line of product or enter a new market. It also saves the company the time and work that would be spent on the learning curve if it decided to start that new product line or venture into that new market by itself.

Conclusion 

These are just some of the ways that a strategic acquisition can help boost a business’s value. It is also worth noting that a strategic acquisition can go wrong if executed poorly. As such, it is advisable to analyze all potential mergers and acquisitions thoroughly before diving in. A credible and experienced mergers and acquisitions advisory firm should be retained to assist with the process. Get in touch today to learn how OConnor Business Brokers and M&A Advisors can help.