The dictionary definition of the word “acquisition” is when an object or an asset is acquired by a larger entity; for example, when a museum or a library “acquired” an important historical artifact. A business acquisition is not far in its definition—it’s when one company or corporation purchases the majority shares of another company to gain control of it. CB Insights reported that corporate giants Microsoft, Facebook, Google, Amazon, and Apple are some of the most active acquirers in their respective industries, with Microsoft already having made seven buys since the start of the COVID-19 crisis. There are plenty of benefits and advantages to having a company be acquired by and absorbed into a larger entity. Here are some benefits sellers can enjoy when their company is acquired.
Buyer synergies
When your company is business or acquired, you can lay claim to a new position in the industry, which has the potential to result in what is called “buyer synergies,” which is another way of saying your company will be part of a greater sum or whole. This can take many forms, including:
- Better employee benefits including education and training as well as more open doors for climbing up the corporate ladder
- Improved volume pricing
- More offerings to existing customers
- Access to more resources to grow the company
- Opportunity for sellers who stay with the company to practice what they love or focus on and sharpen what they’re good at
Reduction of costs and competition
When a smaller firm is obtained through acquisition, there are a lot of financial burdens that can be lifted off its shoulders. These costs and overhead can include the marketing budget. The acquired company could also have increased purchasing power and reduced costs in other areas. At the same time, when a larger firm acquires your business within the same industry, your former competition can become allies.
Obtaining more quality resources
When a larger firm acquires a company, the acquired company gains access to valuable assets and funds for better development, production, and distribution facilities and resources. If your business is underperforming, it might be able to experience more regional or national growth when an acquiring company invests in your business.
A great example is HH Audiology Practice Acquisitions, which invest in audiology practices, helping the practice’s healthcare workers and owners to focus on their patients. Because HH Acquisitions invest significantly in centralized financial, administrative, and call center operations and leverage best practices, the audiology practices within their roster focus on patient care while providing them with quality hearing aids, products, and other services at competitive pricing from all of their partner manufacturers.
Increased long-term valuation
Aside from buyer synergies, the company seller can also gain a lot of other financial benefits if stock appreciation is a part of the deal and if the seller has a material impact on the company’s performance moving forward. At the same time, if the acquirer eventually decides to one day become the seller, the current seller as a stockholder could gain a financial upside from the future transaction if there is a stock-for-stock component aside from other stock options if the acquiring firm is a public entity.
Availability to pursue other interests
While the number of stocks that remain with the company seller varies from deal to deal, many deals always include a combination of stock and cash. On a personal note, a company seller can find themselves more able and freer to pursue other interests and ventures with whatever amount they receive. They will be free to start all over again—whether it’s to build a new company or start over in a completely different industry.
If the succession and exit plan were done properly, and the seller can exit on good terms, they will have more freedom and capacity to pursue other interests and endeavors. As long as the acquisition was made cleanly and effectively, and the employees and consumers are served the way they deserve, a business acquisition can be a positive thing and experience for all parties and stakeholders.
Financial security
If your company is struggling financially and under increased pressure from banks, then being acquired by a larger company is your best option. It will protect not just your interests but also those of your customers and employees. It will help you get out of debt and allows you to take some money off the table.
Bottom Line
There are a few pitfalls that come with selling your company, and at the end of the day, it’s up to you to weigh the pros against the cons. Just do your due diligence and understand your vulnerable spots before you go to the market.
