The Leverage Playbook: Using Acquisition Financing to Gain a Competitive Edge

Acquisition financing permits rapid scaling of size, product line, talent pool and market reach in one fell swoop, compressing several years of organic growth. This is very helpful to companies that compete in industries subject to rapid growth or change. It gives companies a durable competitive edge and creates a wider moat of specialization that is challenging for competitors to navigate. A truly great business usually does two, three and four things very well in order to stay one step ahead of the competition. Acquisition financing can help build this internal competency thereby adding competitive differentiation.

For example, companies with great product lines but underdeveloped customer bases often turn to acquisition financing as a way to improve their distribution channel strength. By acquiring a company rich in distribution power, the acquirer vertically integrates and has a much wider customer base over which to monetize its valuable product set. Companies that have both great products and strong direct customer relationships are naturally more competitive and built to withstand most market cycles. Companies that have superior technology and revenue generating models use acquisitions as a way to scale the size of their business and increase profitability. Though they could capture new customers on their own, it is more profitable and faster to acquire smaller businesses via a roll-up and fold them in.

How Acquisition Financing Transforms Growth Ambitions into Scalable, Strategic Advantage

With roll-ups, acquisition financing not only powers faster growth but also produces new specialty products and services. These new products add a new dimension to the product line giving the business a new front for growth and competitive edge. Companies at larger scale have a number of inherent advantages over small mom & pop businesses. They usually have higher level systems and financial reporting. They are able to invest in more growth and cultivate talent over long period of time. The greatest risk to fast scaling is the strain on management resources and systems. Acquisition financing conducted on a prudent basis forces the company to account for these factors early in the planning stages in order to attract financing. When acquisition financing is properly deployed, companies gain in both competitive standing and financial value.