Despite the good times economically, don’t be lulled into a false sense of security. Most of us — my company included — operate in hotly competitive industries filled with worthy companies competing for client relationships by offering innovative, high-value goods and services delivered on the customers’ terms of speed and price.
Just as a cornered animal will fight to the death, strong leaders at companies in crowded, mature industries will figuratively fight to the death, by any legal means. As a result, achieving top- and bottom-line growth has never been more challenging.
There are two ways to grow. There’s organic growth from within a company’s culture, capabilities and resources, and there’s acquired growth that brings new ways of developing and delivering goods and services. While there are pluses and minuses to each, successful leaders use a bit of both.
Growth starts from within.
Organic growth relies on investments in people, processes, products and plants. These investments are funded through cash flow, commercial lending or public and private equity offerings. Nonpublic companies have a choice of short-term concessions on earnings for the long-term benefit of higher revenue and margins. Publicly traded company CEOs have a shorter shelf life to explain several quarters of earnings disappointments.
If you can’t beat ’em, buy ’em.
The best companies supplement and complement their organic growth strategies through acquired growth. By servicing that debt through earnings or exchanging equity stakes in the company, successful acquisitions can turbocharge financial performance, market rank, brand reputation, customer loyalty and employee morale.
Knowing that two out of three mergers end in failure, start with the end in mind: Avoid buyer’s remorse by making the right purchase at the right time for the right terms and, most important, for all the right reasons.
The right purchase brings fresh intellectual capital, reimagined products and services, new technologies, innovative solutions and reimagined ways of solving business problems. A horizontal acquisition broadens the product mix, service offering and geographic reach outside your core strengths and markets. A vertical acquisition delivers goods and services from pasture to plate, so to speak.
From initial concept, design and marketing to production, distribution and service-support, vertical integration captures customer spending bound for specialty providers, strategic partners and vendors from within your industry expertise.
The right reasons to acquire include:
■ Increased scale to offer a deeper and wider goods and services offering, speed to market, cost efficiencies and high-touch customer engagement.
■ Broader geographic expansion for more talent and closer customer service offices, production facilities and distribution centers.
■ Stronger employee engagement by inspiring a shared sense of purpose, attracting top talent and retaining the best and brightest.
■ Improved competitiveness in developing new markets and more loyal customer relationships.
Ironically, the best time to invest in acquired growth is during a period of organic growth. After all, you have to stand on your own two feet before you can walk alongside others. You can’t buy prosperity if you’re saddled with bad management, marginal products and services, operational inefficiencies, poor brand management, customer dissatisfaction and employee disenchantment.
Neil Mortine is the president and CEO of Fahlgren Mortine, one of the largest Ohio-based communications and creative services agencies, with 11 offices in the U.S. and affiliate relationships overseas. Neil recently was recognized as the nation’s Outstanding PR Professional of the Year and Fahlgren Mortine was named Global Agency of the Year by leading industry trade publications.