Whether to diversify a dealership’s focus or product range is not the question. What we should be asking is, can we buy a business that brings diversification right to our door?
Should we diversify? It’s a question asked in many boardrooms, as leaders seek new ways to enhance their company’s bottom line. Diving into a new business area can open doors but it often comes with new headaches as well.
Who will manage that new workstream; who has the right skills and, more importantly, time to do so? Can we justify the expenditure to set it up? How will we market to this new stream of customers?
While the phrase ‘mergers and acquisitions’ might conjure visions of bluechips and FTSE 100s, they can be just as relative to the smaller dealer when it comes to diversification.
Sian Haskell, director of marketing at Integra Business Solutions, says dealers should consider M&A as part of their plan. “M&As can play an important part in a diversification strategy, plugging the gaps a dealer has in the market. Adding a specialist, niche, business with the right product or service offering – and the skillset required to sell it – can be a quick win.”
Acquiring another business can be a daunting prospect, but dealers shouldn’t be shy about exploring the opportunities – Sian has a list of the ultimate benefits to dealers willing to take the plunge, “Economies of scale, lower operating costs and increased revenues are probably the main benefits. As the market continues to contract, M&As are a quick way to grow a customer base and market share.”
Given the current economic climate, businesses might be concerned about freeing-up capital to invest in new ventures but Mark Heath, managing director at Office Power, believes that money doesn’t have to be seen as a block to doing business.
“The assumption is often that cash reverses are required to achieve M&A, but this does not need to be the case – at least, not in all cases. Increasingly, where the acquiring dealer can add strength and value to the acquired business, generating cash, the results can and should be positive.”
Whether a dealer is looking to acquire, or be acquired, dedicating the time to planning out the process properly is essential. A business that is well-run, clean and efficient will be a more attractive prospect, and will attract the right buyer. Similarly, the business doing the acquiring should be ready to leverage the efficiency benefits of the merger and prepared for full integration.
Finding a buyer doesn’t have to be a painful process either, particularly when dealers are willing to make the most of the resources they have at their fingertips. “The opportunities are broad and exciting. Key to any deal is the right support and advice,” says Mark.
But where to go for that advice? Dozens of consultants, specialists and other experts will happily bite a dealer’s hand off to help them find the right buyer, but is that always the best option?
A good first port of call is the dealer group. Rarely do dealer groups charge a fee for bringing a buyer and seller together – after all, it’s in their interests to keep the turnover within the group, and to ensure both businesses have a successful outcome. M&A can seem a formidable rainbow to chase, but the potential pot of gold at the end makes it worth the effort.
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