Acquiring competitors: Timing and Approach?

November 05, 2024

by a searcher from London Business School in Seattle, WA, USA

Looking at closing a deal in the manufacturing space with $12M revenues in the next 2 months. Don't want to take my eye off the ball but already have some questions for this community on next steps:

1) While there's clearly lots to do internally in the first year or two, there are a handful of obvious direct competitors and companies in adjacent spaces that would be attractive tuck in acquisitions. Unsurprisingly, the theoretical inorganic growth value lever is huge but I don't have a good feel of when to make explore making that move. Is it day 1? Day 180? Year 1...2?

2) Clearly approaching competitors can be a risky move as they could try and poach your customers / clients. However, like most search targets, its unclear if these legacy businesses have great exit / retirement plans in place and perhaps would welcome an open discussion. How have others handled this?

Reply by a professional
from Villanova University in West Chester, PA, USA

^redacted‌ we assist a number of clients with roll ups, and typically see them beginning this process in years 1&2. It generally depends on how good the platform company is already and how much work needs to be done. If it’s a poor platform company, growth with compound it’s problem. If they’ve gotten it to a good place, growth may compound its success. So, it’s really more about how much work needs to be done for the platform company. Most people take a###-###-#### day watch, learn and listen approach before making major changes. Happy to discuss this further or provide legal services if needed.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would definitely recommend getting your arms around your acquisition first. There are likely to be things that come up that you do not expect, especially in the first six months to a year. You do not want to keep your eye off the ball. Also, if you have issues with your existing business, it is going to make it that much harder to raise capital or debt for your next acquisition. You really want success as early on as you can achieve it. However, if everything is running normally, year 2 or 3 is usually a good time to start looking for acquisitions. You want to be sure your ship is running tight and you can really get some efficiencies with your acquisitions. I hope this helps. Good luck.

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