Assessing the growth prospects of a potential acquisition

When you’re planning an acquisition, there are likely to be multiple reasons. Maybe you want to expand geographically, diversify your product range or services, boost your profits or expand your market share within your existing sector.

What all of these things have in common, however, is that they are all centred around one thing: growth. Of course, any new acquisition will need to be compatible with your existing business, but you’re also likely looking for them to offer new growth routes.

So, how to assess that potential? In this piece, we’ll examine some of the aspects you can look at to gauge a potential acquisition’s prospects for sustainable, long-term growth that will add value to your business.

Is there strong demand for its services?
By examining a company’s performance over the past few years, as well as doing wider research into the sector it operates in, you can get a good idea of the existing demand for its products or services. As well as providing important insights into whether a company is performing strongly or not, this can also be vital to eyeing potential future growth avenues.

Key areas to look at will include growth trends within the business’ sector, as well as information regarding its customer demographic, their economic behaviour, tastes and social practices. This can show you existing areas of the business that could be capitalised upon further, as well as potential opportunities that are currently going unexploited.

Maybe the business would benefit from investing more in technology in order to boost its online profile. Maybe there is strong demand for its services, but its current marketing strategies are not fully taking advantage of this.

Undertaking such an assessment at an early stage of the acquisition process will be crucial to establishing whether a company has strong growth prospects and, should you decide to proceed, give you some ideas of how you could boost its growth post-acquisition.

What are its competitors doing?
The obvious next step when assessing growth potential is to look at what a company’s competitors are doing, including both the companies most similar to it currently, as well as perhaps larger firms that you feel the business should be looking to challenge in the future.

Analyse a competitors’ strategies to identify strengths and weaknesses. Not only will this help to show you elements you could potentially institute into your acquisition, it will also enable you to identify niches and areas of the market that the business could move into in order to take advantage of underserved customers, untapped demand and get ahead of the competition.

What are the complementary markets?
Untouched areas of a business’ current market are one thing, and certainly one of the quickest avenues to growth post-acquisition, but growth strategies need to take in longer-term considerations too. One of the best ways to go about this is to look at different markets that are perhaps adjacent to a company’s current offering.

This is likely to be an approach that will require a considerable amount more work, investment and, potentially, a significant alteration of a company’s business model. But examining the possibilities strategically could yield entirely new avenues of growth that truly help the business to expand and establish a strong, diversified growth strategy with an eye on the long-term.

As an owner, this also gives you scope to get creative and think entrepreneurially to come up with fresh, original growth ideas. For example, maybe you’ve acquired an app providing workplace management services. The obvious route here would be to add more tech-related features, but what if you thought outside of the box and opened a branded co-working space and café?

Looking at ways of tapping into new demand within a business’ existing markets and closely analysing its competitors are both invaluable ways to identify immediate growth opportunities post-acquisition. Once you’ve got this trajectory established, though, you will have more scope to use your imagination to spot ways to generate even greater growth.