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Fifty per cent of business owners and managers will consider acquiring another business during 2016, with 14.7 per cent saying an acquisition is 'likely', according to the recent HLB Mann Judd Corporate Perspective survey.
A quarterly survey found that more than 80 per cent of business owners were unlikely to sell their own business in 2016, a finding which indicates a favourable environment for the 20 per cent of business owners who did want to exit their business.
It means there is an opportunity for other business owners to review their exit and succession planning strategies to meet the market demand for good-quality business acquisitions.
Preparing to sell a business, and ensuring its value is maximised, requires planning.
Business owners who think it likely they will want to sell their business at some point in the next decade should start taking steps now to ensure their business is ‘investor ready’.
Even if the intended sale is still some time off, it’s always useful to be prepared for opportunities that arise.
Business confidence
The Corporate Perspectives survey also showed that business owners’ confidence in their ability to increase profitability in 2016 was mixed, with just over half of respondents saying they have “low confidence” of improved profitability during the year.
Of the remainder, 15.5 per cent are very confident, 17.9 per cent confident, and 15.6 per cent moderately confident.
In the current economic environment, businesses that are not confident of their ability to increase their profitability need to start focusing on improvements such as internal systems and processes.
They should put in place a detailed business plan and adopt a strategic view to drive business profitability.
Acquisitions
There is no doubt that one successful strategy to increase the profitability of an existing business, if executed effectively, is acquiring another business.
While business owners shouldn’t pursue an acquisition just for the sake of growth, and must ensure it first meets their strategic objectives, it can be an efficient and effective way to expand.
However, the success of an acquisition is reliant on the strategic fit of the target company to the ongoing business strategy, the quality of the due diligence completed, and the post-acquisition integration plans.
The acquisition and integration can quickly become costly to both businesses if the right plans and management are not in place.
The first 100 days following acquisition are crucial to the integration of the acquired business into an existing business.
Businesses need to pay attention to the observations and insights gained through the due diligence process and appoint specialist advisers to ensure a successful integration.
ABOUT THE AUTHOR
Nicholas Guest
Nicholas Guest is the director of audit and assurance in HLM Mann Judd’s corporate advisory division. He is a highly experienced accounting professional with over 12 years’ experience in the provision of advisory and assurance services to a broad range of entities and industries. Nicholas is respected for his ability to understand his clients’ business and accounting requirements, while being proactive in meeting their deadlines and identifying ways to add value to their business.
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