Using M&A in your high-growth strategy
High-growth accounting firms are increasingly using mergers and acquisitions as a strategy.
The recently released 2019 High Growth Study from the Hinge Research Institute revealed it isn’t just high-growth firms taking advantage of M&A. Instead, almost 40 percent of both average-growth and high-growth firms saw some degree of M&A activity last year.
If you want to use M&As to grow your accounting practice, here are some perspectives to consider.
Financial vs. strategic M&A
First, let’s take a look at the two different kinds of M&A: financial and strategic.
Financial M&A deals are typically orchestrated as a means to generate growth or stabilize a firm’s position in the marketplace. They are often motivated by the desire to expand services geographically and add clients. They may or may not have a true strategic purpose. That’s why for our purposes — building and maintaining fast growth — we’re going to focus on strategic M&As.
While strategic M&A deals often have the effect of generating more revenue, they usually have a greater strategic purpose. The motivation to merge with another firm is grounded in a desire to increase credibility and expertise, with the end goal of becoming more competitive in a specific industry or service category. The opportunity to acquire another firm often comes when the retirement of a key player produces gaps in expertise or management. Taking advantage of these opportunities can be an extremely effective growth strategy.
Let’s examine a few of the top reasons for undergoing a strategic M&A deal to see how you could fit these growth strategies into your business plan:
- Your services need to evolve. If you’ve noticed a gap in the services you offer or the clients you’re able to land — or if your target audience looks to be changing — M&A can be one path to evolution.
- You’re lacking in visible expertise. As a professional services firm, you aren’t selling a product — you’re selling the expertise of your people. While building visible expertise is certainly doable over time, M&A is a quick way to add new skill sets or a big name to your repertoire.
- You see an immediate financial advantage. When firms that are considering merging have overlapping services or assets, it can be quick and easy to cut costs or boost revenue once you team up. Combining forces can also help you grab a bigger chunk of the competitive landscape, which can yield other quick benefits.
- You need to expand. If you’re craving a change in structure or business model, M&A can be an effective way to diversify or add a new business unit.
- You want to meet goals faster. Sure, you know you’ll meet your goals eventually, but if you want to start delivering a new service sooner or reach your financial goals in less time, strategic M&A can help you get there faster.
Do the above reasons sound like something your firm needs to do? Then it’s probably time to develop your very own M&A strategy.
5 tips for developing a high-growth M&A strategy
While it can be tempting to jump feet first into considering specific acquisitions, it’s important to take the time to analyze the market and figure out how to best position your firm. Here are five quick tips for developing a strong high-growth strategy:
1. Base it on research. Clear, accurate research can help reduce the risks that go into any M&A deal and protect your investment. Make sure it makes sense from the perspective of the market.
2. Be proactive, not reactive. Think ahead instead of getting bogged down in the problems of now or a quick short-term gain.
3. Don’t be afraid. While you don’t want your strategy to be too crazy, a little risk is important if you want to garner significant success. If it feels too comfortable, it is probably not really strategic.
4. Get buy-in. Not only your senior management but also other stakeholders and key staff should be ready and willing to embrace your plan.
5. Follow through. It will take time to work out the details, but the more upfront planning you do, the easier it will be to put your strategy into action and follow through to make the acquisition successful
With clear reasons for taking on a strategy M&A and a well-developed growth strategy, there’s no reason your firm can’t achieve the high growth and success you’ve been waiting for.