{"id":832,"date":"2024-03-05T09:50:39","date_gmt":"2024-03-05T07:50:39","guid":{"rendered":"https:\/\/agilequity.co.za\/?p=832"},"modified":"2024-03-05T09:50:39","modified_gmt":"2024-03-05T07:50:39","slug":"alchemy-and-growing-your-business-acquisitively-how-does-it-work","status":"publish","type":"post","link":"https:\/\/agilequity.co.uk\/index.php\/2024\/03\/05\/alchemy-and-growing-your-business-acquisitively-how-does-it-work\/","title":{"rendered":"Alchemy and growing your business acquisitively, how does it work?"},"content":{"rendered":"\nGrowing a business acquisitively is one of the quickest ways of growing and, when done\nproperly, has all the characteristics of alchemy.<br><br>\n\nIt is an approach used by many iconic and fast-growing businesses in the world including\nGoogle, who has made more than 200 acquisitions since 2001; Microsoft, who acquired\nmore than 200 companies since 1987; and Amazon, who acquired more than 100\ncompanies since 1998, to name a few.<br><br>\n\nUnderstanding the benefits of acquisitive growth is important for both buyers and sellers.\nBuyers can use it to quantum leap the value of their business in a shorter space of time and\nclever sellers, armed with this knowledge, will be able to identify businesses that will benefit\n\nthe most from buying them and trying to secure some of these expected benefits through a\npremium price on exit.<br><br>\n\nBuy-side alchemy, how does it work?<br><br>\n\nThe value of a business is effectively driven by two factors namely, the expected future cash\nflow a business will generate and the risk that those cashflows will be generated. Buying a\nbusiness can tick both those boxes.<br><br>\n\nIn terms of expected future cash flows, the positive impact of synergies such as shared\ncosts, economies of scale, cross-selling products into each other\u2019s client bases, and\ncompeting more effectively with the newly acquired capabilities will result in the merged cash\nflow of the two entities being greater than the sum of their parts and so to the value of the merged entities. 1+1 will equal 3.<br><br>\n\nIn terms of risk, the lower the risk of a business the lower the discount rate and the higher\nthe value. If the risk of the merged entity is lower than the risk of the two separate entities,\nthen the combined value of the merged entity will be greater than the sum of the two\nseparate businesses, again creating value from nothing.<br><br>\n\nSome of the risks that will be positively impacted by merging two entities will be firstly,\ncustomer, market, and product diversification; Secondly, it can help to achieve economies of\nscale and greater profit with less likelihood of the business failing. Thirdly, it can help to\nincrease market share and reduce competition, which can lead to increased pricing power\nand profitability. Fourthly, it can help to gain access to new technologies, products, and\nservices, which can help to drive innovation and growth and thus competitive advantage;\nand finally, if your business has a dependency on the owner, it will reduce this dependency\nand associated risk.<br><br>\n\nGrowing acquisitively is risky but, with the benefits of Alchemy up for grabs this approach\ncannot be ignored, especially considering that all the risks of growing acquisitively can be\nmanaged.\n\n\n","protected":false},"excerpt":{"rendered":"<p>Growing a business acquisitively is one of the quickest ways of growing and, when done properly, has all the characteristics of alchemy. It is an approach used by many iconic and fast-growing businesses in the world including Google, who has made more than 200 acquisitions since 2001; Microsoft, who acquired more than 200 companies since [&#8230;]\n","protected":false},"author":1,"featured_media":833,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_themeisle_gutenberg_block_has_review":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-832","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/832","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=832"}],"version-history":[{"count":0,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/832\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/media\/833"}],"wp:attachment":[{"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/agilequity.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}