One of the best ways to grow your company is by entering an overseas market. Many companies will open a branch office in a new market and sell their goods and services to an entirely new pool of consumers, which can lead to tremendous growth for the business overall. Another route to international expansion, however, is an international acquisition.
Many Chinese companies are using the acquisition strategy to enter new markets or increase their market share in particular industries. For example, a Chinese mobile phone company that creates practical applications for smartphones with an international audience wanted to expand their reach beyond their normal distribution channels. So, they acquired a French mobile marketing firm, helping them reach new customers by expanding their capacity to market their products in international markets.
Learn more about expanding into new markets with an international acquisition.
Benefits of an International Acquisition
Your company can quickly realize many benefits from an international acquisition, such as:
- Gaining quality staff, skills, or knowledge of the industry
- Accessing funding or other assets for new development
- Growing your company by access to new customers and sales
- Diversifying your products
- Reducing costs and overhead
- Accelerating your own organic growth
When you find the right business to acquire, the benefits can be huge. In this past year, a French company that focuses on rental, laundry, and maintenance of linen, acquired a British company in a similar field. The acquisition makes the merged company one of the leaders in the industry, placing the company in a dominant position for growth in Europe.
Assessing Readiness for an International Acquisition
How do you know if you are ready for an international acquisition? Start by assessing your own business and its capacities. One should consider the following steps before closing a deal:
- Carry out a SWOT (strengths, weaknesses, opportunities, threats) analysis so you can understand your own business and the external market
- Assess external factors, such as the economic climate, to see how these factors may affect the price of an acquisition
- Ensure that you have access to the financing necessary to make an acquisition
After analyzing your business’ readiness, you should be clear about your goals for the acquisition, rather than somewhat vague aspirations such as “growth” or “strategic position.” Strategic rationale that benefits acquisitions includes:
- Improving the target company’s performance
- Consolidating to remove excess capacity in the industry
- Accelerating market access for the target’s or the buyer’s products
- Acquiring skills or technologies quickly
- Exploiting industry-specific scalability
- Picking great companies and helping them grow
Finding the Right Company to Acquire
The biggest challenge in international acquisitions is finding the right company to acquire. Indeed, 83% of acquisitions do not create the intended value in the end of the deal. Business culture is an important factor in judging whether the merger will be a success. Though every business that acquires another spends a lot of time looking through the financials and ironing out the legal issues behind the deal, it can be easy to overlook whether or not the two companies will be a good fit. When you look for the right company, make sure that you assess the business culture of both companies. A good fit can bring out the best in each and set you up for growth in the future; decisions made during that acquisition can help the two organizations trust each other.
An international acquisition can help your company grow in its capacity, gain new skills, and gain access to new customers and markets. When you approach acquisitions carefully and strategically, the benefits can propel your company into new growth and success.
If you’re ready to merge with another company, especially one located overseas, be prepared to move fast; deals can open and close quickly and you’ll need the infrastructure and knowledge to take on new team members and business practices. Consider teaming up with an expert in your new market. Velocity Global operates in more than 185 countries and our team can help your organization with an international acquisition. To learn more, contact us today.
