Char Hu, Ph.D., CEO, The Helper Bees.
The first time I was scheduled to meet Andy Friedell, I nearly canceled the meeting. We were competitors, after all, and I didn’t see what either of us had to gain from a short face-to-face. Fortunately for both of us, we stuck to the plan.
Shortly into our conversation, it became obvious that Andy and I shared a bold vision about the aging-in-place industry. We both saw a future in which the many challenges seniors face every day were solved and streamlined, rather than brushed under the societal rug.
One meeting with Andy turned into two. Our second meeting led to a third. It soon became obvious that Andy and I could accomplish exponentially more together than we could apart. In May 2021, I formally brought Andy and his team into my company through acquisition.
A merger and acquisition is one of the most underrated strategies for scaling an early-stage company. It helped us grow six times in just a few years. So, if you’re a young company trying to form an M&A strategy, here are three key questions that every founder should answer before making that first acquisition.
1. Does this team share our vision for the future of the industry?
One major risk of pursuing an acquisition is the possibility of introducing secondary or tertiary goals that distract from your primary vision. I co-founded my company in 2015 to connect older adults to the insurers and healthcare services that help them live with greater independence at home. This vision will always serve as our North Star.
What makes an acquisition successful is when visions are aligned. It might take a few face-to-face meetings to really understand the other team and figure out the complementary strengths that the other needs.
Before you move forward on an acquisition, ask: Does this team accelerate our vision for the future of the industry? Do we complement each other so that both companies, with our shared vision, can grow faster together than alone?
To be clear: A conversation about vision doesn’t stop at the founder level. I believe vision runs deep, seeping into the company culture of every department. A misalignment of vision means overlooking the vital soft skills that foster a collaborative workplace.
2. Is now the right time to acquire another company?
With the booming older adult population, aging in place has become a growth industry. I’m seeing older adults planning to stay at home as long as possible, and long-term care insurance and medicare advantage insurers are eager to support them.
At the top of the article, I referenced Andy’s company, which we acquired in 2021. But that is only half the story. This was not our first acquisition. In 2020, we acquired another company.
Acquisitions have been a favorable tool that enabled us to multiply our growth while continuing to serve our clients more effectively. But the reason for our success, at least in part, came down to timing.
I believe demand for aging-in-place services will only grow. By 2030, about 20% of Americans will be 65 or older. We’re putting the infrastructure in place today that can handle the coming “silver wave.”
The key to acquisition timing can often come down to the ability to quickly enter a new market. The acquisition made it possible to fast-track our entrance into the health plan market, with a product that had already been tested by market leaders.
How do you know when the timing is right? Many subjective factors go into timing an acquisition. Here are a few indicators that the time might be right:
• When you find a company or technology that has already solved a major problem you’re actively looking to solve;
• When you find a company that can accelerate your growth plans;
• When you have the infrastructure and bandwidth to integrate with a new team and tool.
Plus, you can think of acquisitions as a way to fill your revenue channels. Going to market from scratch requires time and resources. Instead of devoting energy to a launch, acquisitions make it possible for your team to devote more time to filling out revenue channels. When two companies merge, their resources can be deployed more efficiently by growing within their existing markets instead of constantly activating new ones.
So, before you move forward with an acquisition, ask yourself: Why now?
3. Is this acquisition better for our customers and both teams—or just my ego?
M&A is a fundamental strength for early-stage companies because it can accelerate growth. The process turns a competitor into an ally, allowing both teams to run faster together than they would apart. The catch is, for an acquisition to work best, egos must be checked by leaders on both sides.
There’s no way around it: Acquisitions are headline magnets. It’s easy for organizations, flush with cash and ambition, to acquire a competitor purely for the ego boost. That’s when things go poorly—and become costly.
An ego-inspired acquisition may slow the growth of both companies and hinder them from achieving their goals. When executives can set aside their egos to consider the logical pros and cons of combining forces, that’s when great acquisitions are born.
In a good acquisition, the impact of both companies is multiplied, allowing them to achieve more together than either could achieve on their own. To do this, the acquiring company must be open to learning from the company they are buying. The executive team for the purchased company must also quickly adapt to the new reality of the reporting structure and seek a way to impact the parent company.
That’s why every leader must ask: Is this acquisition better for our customers and both teams—or just my ego?
Most small teams do not think about an M&A unless they’re the ones being acquired. I want to challenge that standard. No company is too small to form an acquisition strategy. Maybe it’s time to stop battling your competitors. Instead, with a shared vision, the right timing and the right motives, maybe it’s time to join forces.
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