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Growing through acquisitions
Acquisitions are a great way to grow, as you get established business operations, talented staff and cash flow generation from day one. With business acquisitions as part of your growth strategy, you can quickly increase market share in your home markets or branch out into a whole new market. If you are thinking about expanding into new markets, it’s crucial for you to understand the market and your customers. To do this, you can leverage the expertise of the target company’s staff and its customer relationships.
Acquisitions can also give you access to new technology and products and help increase your production capacity. In some cases, it’s also possible to scale the benefits in the production and new technological capabilities to your current business. As you integrate two businesses into one, you can often streamline production or administration by restructuring processes and removing overlap. You want to create synergies by ensuring the whole is greater than the sum of its parts.
Acquisitions from the bank’s point of view
Bank looks at acquisitions primarily from the perspective of risk management – this requires you to have a clear and credible business plan. If you apply for financing from us, we’ll assess the profitability of your core business and the cash flow it generates. In most expansion investments, including acquisitions, repayment ability and the project’s eligibility for financing largely depend on the state and profitability of your current business. If your core business is profitable, running smoothly and generating a steady cash flow, you’ll have the means to pay off your debt and invest in growth.
When evaluating your business, we primarily focus on stability of cash flow, business plan and leverage ratio. We also carry out a thorough assessment of the target company’s competence, competitiveness and profitability, evaluate the compatibility of the two businesses and look at how professional the acquisition process is and how the risks are managed. Most successful companies growing inorganically make small and medium-sized acquisitions in proportion to their size and risk-bearing ability, while gaining knowledge of the market and experience in the acquisition process.
