What are Bolt-On Acquisitions?
A bolt-on acquisition is when a company acquires another smaller or similar company that can be easily integrated into its operations, such as buying a competitor for an overlap in their products or services. It can be done to generate revenue, get products developed, get distribution channels, get customers or any other benefit that can be achieved by using another company’s resources.
When are Bolt-on Acquisitions Used?
For many companies, bolt-on acquisitions are the best option to apply when they are looking for growth because it boosts share prices and increases overall shareholder values without having to go through the trouble of growing them organically. When a company thinks about acquiring another one through a merger or an acquisition instead of trying to grow their business by themselves is when you have bolt-on acquisitions. In order for a company to acquire another one, they must have similar business practices in which the companies will fit well together in order to gain efficiency.
What are the Benefits of using Bolt-on Acquisitions?
There is no risk involved when a company is performing a bolt-on acquisition. The acquisition company only has to pay out the agreed upon price and will receive the target company and its assets and liabilities as agreed upon.
Your company will be able to use the acquired company’s resources to help increase your revenues and overall profits. This can be done by incorporating certain services or products that your company does not have or can’t afford, or it can even be used as a source of testing new materials or marketing techniques. In addition, you will not have to go through any of the technicalities of integrating it into your business for optimal results.
Since a bolt-on acquisition does not involve any risk, this can be used to gain more profit and increase the share prices. A company will be able to accomplish its goals faster and become more financially stable in the process.
Bolt-on acquisitions can help increase your overall customer base by combining the acquired company with your own larger customer base. It can also expand your business market by reaching out to new areas of the market with the acquired company’s products and services.
You will develop better relationships with your existing customers and new ones by acquiring another company that has similar interests and values as you do, which will most likely lead to increased customer loyalty in return for better service.
Bolt-on acquisitions can be very beneficial as an acquisition because it increases your market share as well as increases your exposure to new markets and new customers.
Bolt-on acquisitions can help generate additional revenue by incorporating acquired company’s services or products into your company that you didn’t have initially. If the value of those services or products matches the value of your own and use them for a good price, you will be able to gain more profits and revenue than what you would without it.
Do you need a Bolt-on Acquisition Expert?
Even though bolt-on acquisitions do not involve much risk, there are considerable inherent risks with using them that require carefully consideration. For example, you will have to know that the acquired company’s management team is the best one for your business instead of trying to manage it themselves. If you don’t, certain decisions will be made that could end up negatively affecting the company in the long run. Determining the capacity of a company’s management team often requires expert vetting.
Also, companies can take advantage of bolt-on acquisitions by buying other companies which are similar to their own in size or even larger than their own company. If you are acquiring companies that are too small or if the ones you want to buy are too big, this will make it harder for you to integrate them into your own business because of the amount of resources needed to be spent on each one.
If a company is interested in using a bolt-on acquisition, they should make sure that the acquired company has everything they want and will be useful for their business. They should also find out if their management team is suited for their needs or if there is room for improvement. If not, then it might be time to hire a new management team that can fit better with your business goals and needs.
Bolt-on acquisitions are a good way to accomplish a company’s goals faster and more efficiently because it gives them additional revenue and frees up their own capital to be spent on something else. While the benefits are numerous, it could on turn sour if due diligence and adequate know-how are not applied in the process of adoption.
