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The Power of Acquisitions

Collaboration
Reorganization

15 January, 2019

Danny Stefanic describes the tactic of acquiring businesses, customer bases, and users as a means for company growth.

Problem

There are a lot of people into growth hacking these days. Organizations want to get more customers, grow their businesses, and compete with larger name companies. Certainly when I was younger and just starting out these are the things that I wanted for my startup as well, but I had yet to develop a method for doing so. Eventually, I found one strategy that has continued to work particularly well for me. It accelerates a company from where it stands today into a prosperous tomorrow. This is done through acquiring into your business other businesses, customers bases, content or users. After acquiring several companies into my business, I share with you some of the steps I took along the way to make those acquisitions possible.

Actions taken

  • Do research into the industry that you are in or that you are looking to acquire in to. For one of my acquisitions I researched what tools there were that we needed to use for our learning development business. This led me to a company with an industry standard tool that had seven years' worth of development.
  • Send emails to businesses that you're interested in acquiring. For the same company as above, I simply sent the CEO an email informing him of my interest to acquire, and proposed an opportunity to talk about it. I had found a great business with the right customer base, and to my surprise he came back to me and said that he was looking to move on to other things and needed someone to carry on the business and everything he had built. The CEO of the company was at a point of transition and I was interested which made negotiations possible.
  • Ask business questions. Discuss a variety of topics from user growth to finances. Don't be shy to talk about money, it is a business after all. When these tough matters are addressed and information starts to flow, then you know an open and honest relationship can be built and both parties can work together based on trust.
  • It never hurts to ask. Even if you can't do a business acquisition deal you might be able to make a deal to co-market by publishing a newsletter through their channel and to their audience. Another option is to license their technology. You get a source code license for the product and then you can use it to your liking. Both of these options are much more affordable than having to purchase the whole company and the brand that goes along with it.

Lessons learned

  • Even if you don't think you have enough funds to acquire the business, it never hurts to contact them. If somebody has target products in the same market, or serendipitous markets, then you should reach out to them and start a discussion.
  • You don't necessarily need to be face-to-face to make these things happen but you do need to build a relationship. Become a user or get involved in the community or technology that the company has. I've acquired four businesses around the globe where I've never met the founders face to face, however we still communicate online regularly long after.
  • Use your CEO experience to relate to the CEO of the other company. Whether you're a CEO of a small startup or a big company, you are both on the same level and understand where the other is coming from. They know the same pains and journeys that you are going through, and vice-versa, which makes the relationship relatable and more open.
  • Do not expect everything to be about money. You can acquire businesses, customers, and code built on different factors. For example, if the CEO of a company would like to transition elsewhere and has the desire to see their business to continue and grow. Look for other points of leverage and what you can offer besides the obvious financial gains.

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