Why your growth strategy should include acquisitions, and three steps to get started

When you’re an up-and-coming business kicking goals, there’s a lot to be said for embarking on a process of acquisitions. For starters, joining forces with a competitor business or complementary service is like downing a corporate-sized protein shake — you get big, fast. 

Depending on the arrangements, this can have many potential advantages:

• Expanding your reach into new physical territories or new markets; 
• Quickly building market share without waiting for organic growth; 
• Gaining access to a new talent pool of experts with matched or complementary skills; and
• Cutting or amortising costs by streamlining facilities and/or resources.

With more than 20 years’ experience in senior management positions in telcos including Vocus, Superloop and PIPE Networks (now TPG), I’ve been involved in around 50 company integrations to date, and have learnt what does and doesn’t work well.

Now, as chief executive of fixed wireless infrastructure provider Swoop, acquisition is a big part of our play to shake up the telecommunications landscape.

Within three months of listing on the ASX, Swoop has acquired local telcos Speedweb (regional Victoria), ComComs (Perth), and Beam Internet (regional South Australia). And in a very short timeframe, we have rapidly expanded our coverage and service.

As you’d expect from such an intensive process, we’ve learnt a lot.

Here’s what you should consider when adding acquisitions to your growth strategy, and how to get started. 

Why acquire?

Everyone has their own journey and decisions to make but for Swoop, we’ve acquired several businesses in a short period of time for many good reasons. We have access to capital that we potentially need to use, and it’s more efficient for us to acquire good companies than to grow organically in the regions we want to operate in. It helps to give us scale and market clout, and makes best use of the talent that we’ve got in our organisation.

It’s not easy, but it has been rewarding to watch the company quickly achieve its growth plans. Done well, it’s something all growing companies with access to sufficient capital should consider.

Finding the right business to acquire

What’s the right acquisition to target? For us, it starts with making sure the business is aligned to what we’re doing now, or where we’re headed in the short term. We want to make sure they’re the right size for us.

A company that’s two or three times bigger than us will probably swallow us, more so than our acquisition of them. Every situation is different, though, so it’s about making sure that it’s the right fit for the right time.

Where to start?

1. Develop a long list of prospects

   Do your research on the businesses who could provide value to your own company through an acquisition, then reach out and have a conversation with someone associated with the business. This could be an owner or large shareholder.

2. Set the scene

   Once you have secured a meeting, take them on the journey of what coming onboard with your business would look like, and what you can offer.

3. Commence evaluations

   Once people are convinced, or you work through the issues they need assurance on, you can start evaluations and the process of acquisition. This is a complex process because you’re getting a lot of information, doing contracts, making sure all the boxes are ticked and ensuring you’ve got your valuation right.

In the case of Swoop, it has mostly taken three to four months to work through the processes, but this varies depending on what else we’re working on at the time — as a listed company, we might be tied up in end-of-year reporting — and also the size and complexity of the deal.

Being a public company also adds to the complexity when it comes to getting the work done and communicating internally. At Swoop we’re usually fairly collaborative, but we have to limit the number of people inside the tent. A leak will get you into hot water with the ASX.

After the acquisition

Every integration is somewhat different, but at Swoop, we do have a strategy.

There are streams we look at, asking various questions along the way. There’s a people stream, where you look at how you are physically going to fit the people into your infrastructure, and also setting an organisational structure for the business we’re trying to build over the next two to three years. How are we going to run our business? Where will these people fit, either today or tomorrow?

Typically we’re buying companies where people are staying, because they’re small companies. So on day one, you have to give everyone a home and someone to report to. We try to put the back office systems in first such as common HR, common legal, common finance. Then we look at other stages individually, as the next steps.

What have we learnt?

Make decisions about whether you’re interested, if it’s the right fit or not, as fast as you can. You don’t want to spend months looking at an opportunity, trying to make a decision and wasting time if it’s not going to work out. Similarly, don’t waste time on things that won’t add value to your business.

Acquisition is a way to achieve a vision or a growth strategy, and not necessarily a strategy in itself. If you’re acquiring a company to fix it, or for the sake of acquisition, it’s probably the wrong move.

In the case of Swoop, we’re acquiring companies in regions we’ve strategically identified that we want to grow into — as opposed to buying a company, then changing our strategy to suit that acquisition.

Ultimately, you need to make sure you’re acquiring for the right reasons.