Guiding Your Growing Business: Tips For Evaluating A Potential Acquisition

Posted on: 24 July 2016

For any business owner, that first acquisition is exciting, but often also intimidating. Acquiring another company can be a major deal for any business, and if you are new to the process, you might be wondering what's ahead. The first thing you should do is develop a competitive analysis. It's an evaluation of the company that you're thinking about acquiring, and it allows you to see their current market, the potential for growth and any concerns you might have about competition. Here's a look at some of the basics of the analysis.

Who are the key competitors? The competitor list is a key part of the analysis because it helps you to identify who you need to be focused on for strategic market position. The competitors should be listed starting with the strongest competition and gradually tapering to the minor competition. You'll also want to check out the industry rumors and speculation about any new businesses that may be on the horizon. The more aware you are of the companies you need to watch for, the better.

Which products are real competition? Once you have identified the companies that are considered competition, it's time to look at their products. Identify the products that pose the most significant competition to your company's product lines. Evaluate each one according to its features, value and the market it targets. For the products that are considered real competition for the company you're acquiring, evaluate the marketing campaigns for any insights into how to reach the target market for your company.

What are each company's strengths and weaknesses? In order to effectively position your new acquisition against its primary competitors, you need to be able to identify and target their weaknesses while also overcoming their strengths. Look at each competitor from the perspective of a new customer or hire a consumer survey company to help you evaluate the consumer response to each competitor.

What is the current market projection? Before you can make a final determination on the value of the acquisition, you need to know what your identified market is projected to do in the next few years. Look at the growth trends of the last couple of years and then consider the current economic situation to determine where that industry is likely to go. If consumer activity has been growing in the market over the last few years and the economy is strengthening, you can anticipate that the market will grow in the coming years.

For information about tech acquisitions and other industries, talk with a merger and acquisition specialist.