What to Consider If You Want to Grow by Acquisition

Mario Carvajal

There have been roughly 3,500 merger and acquisition transactions announced by US acquirers in 2023 so far, according to PWC. That’s up 40% from 2020 and the current trajectory suggests it may be even higher by the end of year.

Many organizations are asking themselves when it makes sense to invest in homegrown research and development, or if they should consider inorganic growth. Acquisition is enticing because it can often speed time-to-value for product and platform innovation, accelerate new customer growth, expand relationships with existing customers — ultimately driving revenue growth.

3 Factors to Help Grow by Acquisition

Here are three factors you should consider to make your M&A decision a success.

1. Internal Preparation

Many organizations don’t engage in M&A activity because they’re not equipped for the inevitable transition period and the necessary investment in integrating their businesses on a granular level. In fact, over 50% of organizations in 2022 found integrating people, systems and processes difficult to navigate during M&A. Further, when weighing the cost of internal development versus acquisition, nearly all (90%) of organizations believe success is dependent on effective transformation planning and execution, including having the right infrastructure and people in place.

With that in mind, first consider how you would migrate critical business data, where you would collaborate digitally and what software-as-a-service (SaaS) technologies you’d use across departments like marketing, sales and product strategy. Understand other variables such as the volume or quality of data an organization has because that has implications for what products you can build on top and what storage costs you may incur. Setting aside enough time and resources to iron out these details upfront is a critical step and should happen well before any deal is final.

2. Potential Platform Expansion

Nearly three-quarters of leaders indicate access to new technologies as a motivating factor for acquisition. Further, 88% of organizations view target companies’ technology capabilities as a mechanism to accelerate their own digital solutions and add new value to customers, such as implementing technologies like artificial intelligence and machine learning.

But it’s more than just acquiring the technology to expand their platforms — organizations must focus on digital dexterity, meaning how their employees adopt and use this technology. And this expands beyond your engineering teams. Certainly, they must understand how another organization’s technology will complement yours to build a stronger platform, but your sales teams also need to understand the combined value-add. Often, enabling teams to be agile in their use of the technology to solve emerging customer problems is the most challenging aspect — and risk — in achieving all benefits of the acquisition.

3. New Market Priorities

From 2021 to 2022, there was an over 70% increase in significant interest in foreign targets, demonstrating that more organizations want to continue expanding their global reach as they rethink their cross-border strategies. Early data shows this continues to grow, especially for technology companies, whose target audience is expanding along with digital and cloud maturity abroad. For example, Europe and Central Asia rank high on the MIT Cloud Ecosystem Index (PDF), with Singapore, Switzerland and Germany rounding out the top three.

To capture new markets, consider acquiring local organizations because of their expertise in unique problems and new applications of — or expansions to — your products. Additionally, local organizations can help overcome language and cultural barriers, which is essential to create an environment of trust when dealing with emerging technologies or safeguarding critical business data.

Ultimately, there can be many benefits if you decide to grow through acquisition. But it’s like anything else — you need to be prepared for the change, both with the digital collaboration and SaaS platforms you plan to use to power work, and with how you’ll use the intellectual property you acquire.

Making sure you are aligned on integration logistics and how you will improve digital dexterity across the newly combined organization may not be the most exciting part of the deal, but it’s often the most important.

Mario Carvajal is chief strategy officer at AvePoint, where he formerly was chief technology officer and senior VP of financial services and engineering services. He is a graduate of Rutgers Mason Gross School of the Arts. You may follow him on LinkedIn or @AvePoint on X.