Growth Strategy Analysis for the Week of January 6 - 13, 2019
Three of the four growing companies covered this week used acquisition strategies to grow. This play should come as no real surprise, particularly in mature industries like the insurance brokerage market, Gallagher and Hyperion for example.
(Note: We should also not ignore the fact that an entire multi-trillion dollar markets exists for mergers and acquisitions in the private equity, business brokering and consulting market.)
Competition is strong in insurance agency/brokerage (organic growth leaps are unlikely), the field is blanketed with operators and economies of scale can be achieved with clever business models and good systems. Presumably, the acquiring companies are able to offer attractive buy-outs to the acquired management teams while still able to generate long term value. We expect consolidation will continue in this space, especially as baby boomer generation brokerages aim to cash out for retirement rather than pass the firms to the next generation.
But growth by acquisition isn't only viable in slower growing industries like insurance. We also see the growth by acquisition strategy continue to play out in the tech space. Last week also saw one of the leading e-commerce platforms, VTEX, continues to expand with its acquisition of UniteU. And acquisitions aren't just for the big players. While they dominate the headlines, smaller companies and “solopreneurs” may want to seriously explore this strategic growth move. In those cases, you may not need much capital. Rather, the challenge will be to find a kindred spirit and a shared vision with your potential alliance partner.