Corporate acquisitions, a phenomenon that is increasingly prevelent in today’s news media. Companies will buy up smaller competitors. Others will buy related businesses to leverage the competitive advantages of each. In a heavily saturated market, acquisitions are one way to get ahead, but only if pursued correctly.
Buying a competitor just to reduce competition is a poor investment. You buy a competitor when the purchase would enhance both brands’ performance. Do you produce similar goods in two different facilities? After the purchase, use just one facility and thus improve your bottom line, freeing capital for other marketing investments. Does the competitor have a better understanding of a market while you have a greater capacity to do business there? Combine their market savvy and your operational prowess to fully capture the market for both brands.
There are several other reasons an acquisition could be a good idea, but they are specific to industry, market, and business size. Managers must survey their market for themselves and make an appropriate decision – to buy, or not to buy. There is one key point every manager must keep in mind, though.
You are buying a brand, not an operations method, market research, or management team. A business and brand is a whole package – you can leverage its strengths to improve your business, but you can’t strip it for spare parts and hope performance will still improve.
Think of your overarching corporation as a stage coach, always moving on to the next town or market opportunity. Your brand is the horse pulling the stage. You notice the competition has a horse with a certain characteristic that will improve your travel time – longer legs, greater stamina, lower need for grain, or something along those lines. You buy the horse so you can leverage its strengths and those of your existing horse together.
In this example, you will always put the horses side by side. Would it make any sense to chop off the new horse’s legs and lash them to your own? You horse will not run any faster and you have just destroyed the reason for buying the competitor in the first place!
Business is the same way. You buy the brand to strengthen your corporation and, eventually, strengthen an existing brand. This is the only way an acquisition will benefit both companies and build on the already captured market share of each.