By Mattias Kaneteg, founder and CEO of international web hosting company Miss Group, shares his experience of growth through acquisition and offers Business Express readers his insight.
Acquisition has long been an established tactic for companies looking to grow quickly – and with good reason. Acquiring other businesses is a way to accelerate organic growth by quickly diversifying services and adding new markets. In taking on another business, you can build your brand and transform the dynamic of your existing business overnight – just as I did with my own business.
However, a ‘buy and build’ approach is not without its risks as a growth strategy and executing any successful acquisition requires careful planning and consideration.
Miss Group’s own robust, fast-growth acquisition strategy has allowed us to grow our web-hosting business internationally and we now support over 900,000 websites globally. In the last 24 months, we have completed 14 acquisitions across Europe and the USA.
Acquisitions have allowed Miss Group to enter new geographic markets, broaden the services we provide and rapidly increase our turnover in a far, far shorter timeframe than we could ever have achieved organically. It’s a strategy that’s resulted in an exceptional return on investment for all shareholders, with an internal rate of return (IRR) of more than 100%.
Based on my own experiences, here are the key considerations I believe businesses seeking to grow through acquisition should be aware of:
- Preparation is key
Fail to prepare and prepare to fail, or so goes the saying. Preparing for acquisitions actually begins well before you identify a potential target business to buy. Because mergers and acquisitions can be fiercely competitive and incredibly fast paced, it’s vital that your house is in order long before you start conversations about purchases. Otherwise, you could spot the ideal acquisition but be unable to act – which is an incredibly frustrating situation to be in.
That means evaluating your finances, securing the best senior management team you can find, and finding the right funding partner. When Miss Group was considering our first acquisition, the preparation process started years before the deal was completed.
- What’s your goal?
Spending time working out exactly what kind of business is going to be appealing to you is a critical exercise. You should be ruthless in building your ‘dream acquisition’ profile and then make sure that your funding partners and legal team all fully understand where you are headed. This allows you to trust that your partners are working with you towards your longer term goals.
Part of this involves creating a robust business plan that maps out your growth and explores the role that acquisitions will play in achieving this.
You should also be very clear about the ethics and alignment of any potential business with your own. For the best cultural fit and for an acquisition to be successful and smooth, it’s important that the target business’ way of working is similar to your own. In fact, the cultural fit of a potential new business is one of my own top priorities when I’m looking at new opportunities. If they aren’t set up to approach business in the same way as we are, it can make a smooth transition extremely difficult to achieve.
- Build your business profile
In order to attract funding partners and make your business an appealing investment opportunity, you’ll need to invest in building your profile. Emphasis should be placed on establishing a value proposition and carrying out competitor analysis while also considering your own key strengths, core customer base and revenue streams.
When you’re ready to engage with an investor, you must:
- Highlight your senior management team’s expertise
- Clearly communicate your growth plans and show how acquisitions form part of these
- Demonstrate the market opportunity for increased business in your sector
- Be clear about your point of difference to competitors
You may need to invest in marketing, digital or PR support to build your external profile, or in stakeholder engagement to bolster your reputation in your own circle – all things which we do at Miss Group as we continue to grow.
- Timing is everything
When the right opportunity presents itself, you need to move fast. Good businesses open to purchase are often snapped up quickly and you will need to be ready to move when the time is right. Having your plan, funding and legal due diligence in place is key to this.
I believe that, if you’re serious about growing through acquisitions, you must have one eye on the market at all times and be ready to move as soon as necessary.
- Think about your exit
Mergers and acquisitions are a tried and tested way of growing businesses. There’s nothing quite like the thrill of executing an acquisition and it’s something I personally love to do. However, it’s important to keep an eye on the end goal, which for most is exiting the business.
You may have plans to grow your business over years to come, but if a larger company comes knocking while you’re growing, it’s only natural that you’d explore your options. The timing can often be perfect and, just as you keep your eyes open for businesses to buy, you should keep an open mind about being the acquired business, should the right opportunity present itself.
At Miss Group, we’re continuing our own exciting growth journey and are constantly looking at new markets and new services to develop our offering. Our mission is to be the best provider of hosting, domain and other web services, helping millions of SMEs to do business online, offering a competitive pricing strategy and excellent customer support.