A business’ growth can be dramatically accelerated through mergers and acquisitions. If this is a path your business will pursue—and you are expanding to a new geographic market—it is very important to first analyze the target market before approaching acquisition targets in the new market. Ideally, you can grow into a contiguous market, but that is not always the best option, so it is important to evaluate the market thoroughly.
We used this strategy to create a playbook in Los Angeles County from 2016 – 2017, acquiring the region’s No. 5, No. 6 and No. 11 companies to create the No. 2 marketshare brands with $7.2 billion of year-one sales volume. It is proven, and it works.
From years of successful operations, you likely know your current market extremely well. What are the market dynamics associated with your market? What is the total housing stock? What is the velocity of the market (units traded per year), average sales price and competitive landscape?
When I was CEO of Pacific Union International, I engaged the WAV Group in 2014 to define the 20 best growth markets for us in California. We have recently completed a similar analysis for a European firm contemplating a business launch in the United States. If you have maximized the growth opportunities in your current market, then it may be time to consider expanding geographically.
Your success in your current market can be replicated in different geographies through M&A. Creating additional economies of scale through continued growth will be critical in the coming years. Shrinking margins are making it essential to explore all growth options. We are proven in our ability to identify vibrant, adjacent markets that replicate your current market dynamics. This advanced analysis will ensure that once you transition from a market analysis to target acquisition candidates, you are focused on market conditions as good as—or better than—your own market. This preparation creates focus, which avoids distractions.
Once your growth markets are defined, it’s time to focus on the acquisition targets within a market. Identifying and approaching several acquisition targets is important as well. You will learn so much about the competitive landscape by visiting several viable players. Culture and business models will be important combination attributes to evaluate which firms will contribute to your culture and momentum as you begin to grow regionally.
Often, the hardest decision is when to say no to an acquisition. These are often the best decisions as well. Like so many other aspects in life, victory favors the prepared.
For more information on our M&A division, visit www.WAVGroup.com.
