“For obvious reasons, growth by acquisition is often viewed as a more difficult option – but it can also be the most efficient way for a business to scale up.”
Driving growth is not always the only focus for shareholders and management teams of mid size businesses (MSBs). It is often the case of management teams being focused on the immediate day-to-day needs of their organisation without considering a longer-term view to understand the strategic direction of the business.
In this respect, setting a strategic plan over several years will help an MSB define the steps needed to help achieve its long-term goals and objectives. Often, this will involve thinking about key growth objectives and how shareholder value can be maximised.
The two avenues to organic growth
Growth can be achieved organically by continuing to increase market share in existing markets or revenue streams, or by the acquisition of other businesses or assets. For obvious reasons, growth by acquisition is often viewed as a more difficult option – but it can also be the most efficient way for a business to scale up. Making strategic acquisitions that increase market penetration, geographical spread, or product and service offerings in a complementary way have an immediate impact. There can be more risk making acquisitions compared to organic growth, but by approaching this in the right way and taking relevant advice, a lot of risks can be mitigated and result in accelerated growth.
To help support an acquisition, a company will often raise finance. The options available to MSBs are wide and varied and include debt finance (of which there has been an increase in the diversity of sources over recent years) and equity finance that can come from sources such as private equity funds or the public markets. Often a combination of both debt and equity finance is the most appropriate funding structure.
The importance of finance and advisors
It should also be noted that raising finance can also help deliver an organic growth plan. Financing can be used to increase productivity through investing in assets and talent, or to support geographic or product expansion.
In summary, businesses that are unable to define a strategic plan to grow can often see slower growth and missed opportunities as the competitive landscape will be dynamic in all industries.
To help execute a strategic plan and support growth, many businesses could utilise the professional community of advisors, such as corporate financiers, that are willing to engage with MSBs in initial discussions to help explore the opportunities available to them. This needn’t mean incurring costs as most advisors are willing to have exploratory discussions to ascertain the likelihood of executing a strategy.
“Financing can be used to increase productivity through investing in assets and talent, or
to support geographic or product expansion."