It's an ideal time to pursue an aggressive growth strategy. Cash is flowing through the markets again, and confidence is rising among consumers and investors. But instead of throwing gas on the fire, most companies are sitting on their assets, perhaps still shell-shocked from the prolonged Great Recession that continues to haunt the economy.
For companies with the fortitude for an aggressive growth phase, acquisitions can be an ideal approach given current economic and financial conditions. For most businesses, however, the real barrier to pursuing growth through acquisition is simply the hesitancy that comes from a lack of familiarity with doing these kinds of deals. As the author H.P. Lovecraft wrote, "The oldest and strongest kind of fear is fear of the unknown."
We recently learned a lot about this process at Pluralsight when we acquired four companies over the course of just eight months. In our situation, acquisitions were a perfect method for accelerated growth because our industry was exploding, and the window for establishing ourselves at the top of the food chain was small. So, after growing the company organically for nearly a decade, we suddenly found it imperative to accelerate our trajectory in short order. This was a very foreign process for us at first, but with four acquisitions in the books we've learned some valuable lessons that can be applied to any company that wants to consider a similar approach.
Here are five key rules to demystify the acquisition process:
- Repeat what works. The most fundamental aspect of executing a successful acquisition is to find a model that you can repeat over and over again. This means keeping it simple and having a clear vision. Know what you're looking for, how it will help the business, and which financial metrics are most important. This will allow you to evaluate an opportunity quickly and not waste time looking at targets that don't make sense. With Pluralsight, we focused on buying companies that would grow our content library in strategic areas and had training that matched ours, both in terms of style and quality but also in format.
- Expedite it. If you follow rule No. 1, moving quickly is a lot easier. You know it's going to work, which means your new challenge becomes increasing the pace by finding new efficiencies. Involve key members of your team early in the process and determine who will help evaluate the various parts of the deal. Align your outside advisors quickly too, so you're able to stay in control and not have them draw out the process. Set expectations across the board about the importance of moving fast. Because while you're dealing with all the red tape and back and forth, you can bet your competitors are working to outmaneuver you.
- Focus on them. From start to finish, learn to think from the perspective of the company you want to acquire. In our case, we needed to ask two key questions: "What do they want in the future?" and "Do they want to be part of our longer-term vision?" The reason these questions are so important is that once they've been answered, you can structure a deal that's a win-win, and ensure that everyone involved has the best interests of both parties in mind. It keeps the process healthy, respectful, and honest. It means the deal can go swiftly and smoothly, and you can feel confident there won't be damage to clean up later.
- Plan for where you want to be, not where you are. Growth is about becoming a bigger and better entity than you are today. As you consider potential acquisitions, think ahead to where you want the company to be six months to a year down the road. Evaluate each potential partnership by keeping future goals--and the company's vision and mission--in mind. Don't be seduced by a deal that won't ultimately get you where you're trying to go.
- Be deliberate about culture. Corporate culture plays a role in successful growth, whether or not that growth comes through acquisition or organically. In the early stages of the company, you may have fostered a culture that worked for that time in your business, but the growth process will shake up your world--and it should. Engage your incoming partners and employees in the process of redefining your shared culture, while being fanatically protective of any cultural hallmarks that are vital to the company's ongoing success. Be sure to identify and hold onto your organization's core values, letting those continue to create the framework from which to build.
Rapid growth is the goal of most entrepreneurs at one point or another, and achieving it means you're doing something right. I would encourage any company with growth ambitions to strongly consider an acquisition strategy, using these guidelines to get started and remove the uncertainty from what will almost certainly be a fruitful endeavor.