top of page

The Strategic Advantage of Investing in Acquired Companies




In an era where technological innovation and globalization continually shape and reshape the business landscape, mergers and acquisitions (M&As) have emerged as a dominant strategic tool for growth and value creation. A fundamental question that often arises post-acquisition is whether to privilege investment in the newly acquired firm or rather opt for its dissolution to harvest short-term gains.


Numerous current studies and statistics firmly advocate for the former approach. Placing an emphasis on investment and nurturing acquired companies offers several tangible and long-term benefits over dissolution.


Unleashing Intrinsic Potential

The Harvard Business Review gives this compelling statistic: about 70-90% of acquisitions are abysmal failures. An astounding paradox, isn't it? After all, aren't acquisitions supposed to drive growth and expansion?


This statistic uncovers a critical aspect of M&As: the real challenge begins after the deal is sealed. A possible key to reversing this gloomy success rate lies in properly managing and investing in these acquired companies.


When the focus shifts from dissolution to genuine nurturing, acquired firms have the potential to unlock their innate strength and contribute significantly to the parent company's growth trajectory. This vision witnesses the acquired company not as a mere asset to be merged or dismantled but as a powerful entity with unique expertise, talents, and market knowledge, now at the parent company's disposal.


Preserving Business Continuity and Brand Legacy

According to a report by the National Bureau of Economic Research, dissolving acquired firms often leads to significant job losses, contributing negatively to the economy and lowering overall societal welfare. In contrast, investment in acquired firms promotes business continuity, safeguarding jobs, and driving sustainable economic development.


Moreover, dynamic businesses are built upon years of hard work and a carefully nurtured brand legacy. Each business carries its distinct ethos and vision which resonates deeply with its stakeholders. Dissolving an acquired company might risk losing this valuable brand lineage.


On the other hand, investing in an acquired company helps preserve this brand legacy, and further, enables capturing of synergies between the incumbent and the new brands. Consequently, there's a potential for reaching new customer segments and scaling market reach.


Futureproofing through Innovation

Innovation is the heart of survival in today's volatile digital landscape. McKinsey & Company reported that companies with persistent and well-managed innovation strategies performed twice as well as peers during economic downturns.


Acquired firms often bring invaluable key innovative capabilities and skills to the table. They play a crucial role in fostering a sustained culture of innovation within the parent company. As part of an investment and nurturing strategy, parent companies can leverage these innovative capabilities, gaining vital agility and preparedness to navigate future challenges and opportunities.


Letting Acquired Company Shine: The Road to Mutual Growth

In conclusion, investing and nurturing an acquired company is far from a benevolent act; it's a deeply strategic move that paves the way for mutual long-term growth and future-readiness. It's about understanding the acquired company's unique strengths and playing upon them to create a harmonious blend of efficiencies and new capabilities, thereby ensuring success in an ever-evolving business landscape.


Indeed, every transition is an opportunity— a chance for reinvention and scaling heights yet unexplored. Acknowledging this, we champion in building bridges, not burning them— maximizing the untapped potential within each acquisitive relationship. Empowering these promising entities catalyzes mutual growth, sparking innovation, and continuity, secret ingredients for a thriving success story. This approach isn't just a strategic move, it's our pledge to each owner-operator entrusting us with their legacy, promising a prosperous path forward, not a dead-end journey.

11 views0 comments

Comments


bottom of page