Massive Growth Possibility with Acquisition Financing

Posted on: June 27th, 2024


Acquisition financing functions as a growth elixir for ambitious, fast-growing companies. It enables growth at fundamental levels of a business thereby creating a compounded scale-up effect. This approach allows companies to have superior capital bandwidth which is a competitive advantage in their industries. Through acquisition financing, companies add more enterprise size and diversification in one large growth step which reduces risk and increases value. Rather than take the slower organic growth rate, companies with market leading products can scale faster by purchasing distribution channels.

Companies with a strong distribution in need of a wider product line can acquire complementary product portfolios. In both cases, the interplay between the company’s strength and the acquired asset leads to a growth spark that catalyzes massive growth. For example, 10% annual organic revenue growth results in a 5-year revenue gain of 61%. If the same company acquires a complementary business and doubles its revenue in one year, its ending 5-year revenue level with no organic growth would still be 30% higher than the company with 10% organic growth per annum. Should the company make a revenue-doubling acquisition and generate 10% annual organic growth, its revenue will be 80% greater than the company with 10% organic growth per annum at the end of 5 years.

Unlocking Growth Through Acquisition Financing

Acquisition financing can unlock this growth if the company invests strategically in the business at the same time as they are making an acquisition. Most acquisition financing lenders allow companies to invest in marketing, business development and research and development, to the extent it will generate growth over the long term. By funding the growth side of the business simultaneously with making a strategic acquisition, the company is well suited for acquisition integration and for driving organic new business development.