How will your business grow?

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In difficult trading times, many businesses are struggling to continue to move their business forward and grow organically. Therefore at times like these, businesses need to look at other way to diversify and grow their business that they may not have considered before.

Joint ventures, partnerships or mergers and acquisitions should be considered as an alternative way to grow your business and offer many opportunities.

Joint Ventures and Partnering

Entering into a joint venture or partnership is a major decision, however it may help you to expand your business, develop new products or move into new markets that are currently unavailable to you.

Joint ventures can offer both parties significant benefits, including:

• Additional technical skills base
• More resources
• Increased markets
• Reduced commercial risk
• Greater capacity
• Access to additional distribution channels

The commitment to a joint venture can vary depending on how you structure it. They can be used for long-term relationships or short term collaboration on specific projects.

Joint ventures and partnering should only go ahead if they are a win-win situation for both parties involved. They normally work best when the companies are involved in complementary activities or skills.

This type of venture can be complex and there are risks involved in this option and problems can occur if:

• There is imbalance of assets or expertise between the two parties
• Completely different cultures or management can result in poor integration
• Lack of support and guidance from management in the early stages
• Different objectives for the venture or objectives not clearly communicated.

Mergers and Acquisitions

Strategic acquisitions or mergers may better suit your business in the long term and can offer many benefits:

• Accessing a wider customer base and increasing market share
• Diversification of products and services
• Accessing funds or valuable assets (i.e. production or distribution facilities can be cheaper to buy than build)
• Additional skills, staff or industry/sector/geographic knowledge
• Reduction in costs through shared budgets and increased purchasing power

However, as with any transaction, it can have its pitfalls such as:

• Key people leave
• Cost savings you expected are not made
• Business cultures do not integrate
• Target business does not perform as expected
• Large resources used to integrate the business lessen the focus on your main aims

All of the options above can take significant time and expertise to undertake, it is advisable to seek professional advice early in the process. By enlisting professional help you can free up your time and advisers can help to:

• Target, identify and approach potential businesses
• Agree the deal
• Raise finance
• Provide specialist tax advice
• Project manage with other third parties such as lawyers etc.

If you would like further information or help with any of the above, please contact your local office.