Growth By Acquisition
Three of our associates recently wrote a book about companies growing by buying other companies
This book is available at Amazon.com
Here is an excerpt from this book:
Buying a Competitor
How many times have you thought about how much better your business could be if you could eliminate one or more of your major competitors? Well, it can be done legally, ethically, and efficiently by buying him.
The other advantages of a strategic acquisition discussed throughout this book still apply. In buying a direct competitor, you will assuredly gain customers, market share, and significant economies of scale and other efficiencies. You can also gain considerable pricing power, lower your marketing costs, and gain additional very real advantages if your major competitor is suddenly no longer a competitor, but instead a new division of your company.
Buying a competitor can be quite a business coup. While there are special advantages in buying a direct competitor, there are special difficulties as well. It's not easy to approach a competitor, even a friendly competitor, with a proposal so bold as a buyout. If you were to directly approach your competitor with such a proposal, the likely knee-jerk answer would be "NO." Even if the answer was more along the I'll think about it lines, once that competitor thought about how he'd have to share intimate financial and other details about his business with a competitor, the answer would still likely be a no.
You can't blame your competitor for being especially sensitive, even to the point of suspicious, to an inquiry from a direct competitor. If the situation were to be reversed, if your competitor were to ask you about selling your business to him, you would be very apprehensive as well.
Approaching a direct competitor is usually best done through an intermediary. An intermediary versed in strategic acquisition can add a level of protection by promising discretion and by assuring all non-disclosure agreements and procedures are followed. Even the fact that an intermediary has been retained will indicate to your target competitor that the inquiry is a serious one, not a fishing expedition or an attempt to gain information through subterfuge.
An intermediary can be particularly helpful in convincing a competitor of the advantages to him to take the inquiry seriously, the main one being that his business may well have more value to a direct competitor than to any outside buyer.
Both parties would share the advantage that the sales process would be likely be relatively smooth and the deal would very likely end in a successful close. After all, buyer and seller may well know one another. Even if that isn't the case, they surely know a lot about one another's business, as they have been directly competing for quite awhile. Due diligence would probably be relatively easy given buyer's knowledge, not only of the industry, but of the target company and certainly the direct marketplace where buyer and seller compete.
So, if there is a chance that a direct competitor of yours may be open to acquisition discussions, it is certainly worth an inquiry. Be understanding of your competitor's apprehensions, but do explain the benefits that would accrue to him. Again, an experienced intermediary can be of considerable help in approaching your competitor and shepherding a deal to fruition.
To find out if buying your competitor may be feasible for you, fill out this simple form or call us at 401-751-3320. We will be happy to advise you without cost, obligation or sales pressure. We will provide preliminary information about your competitor at no charge (if available through our proprietary database and/or other sources)
