The art of growth: acquisition and consolidation

by Phil Quin-Conroy June 8, 2016

This is the third step of McKinsey & Co’s ‘Staircase to Growth’, and in the broking channel such strategies can be increasingly relevant as businesses look to do more to compete in a crowded space.

To know more about the saircases to growth, read: “How to grow your business: the art of business growth in seven simple steps”

and to know about the first step, read “Stepping into new competitive arena” and not to miss the second step “ Expansion into new geographies

While there will always be a place for small brokerages, those with their minds set firmly towards growth should analyse their business to see if acquisition or consolidation is a viable pathway.

The November 2015 ‘Capital Confidence Barometer’ by Ernst and Young revealed that 53% of Australasian businesses are thinking of an acquisition in the next 12 months. Despite this, Credit Suisse research that analysed 550 completed acquisitions by Australian-listed companies from 1995-2014 showed shareholders in the acquiring company suffered under performance of more than 1 per cent over the 12 months after the acquisition was announced.

Even though these statistics apply to listed entities – they do provide a valuable lesson about acquisitions in general. Namely, acquisitions are a popular growth strategy but they do not always lead to success. An extensive planning phase and focus on strategy is ‘make or break’ when it comes to this step to growth.

According to McKinsey & Co’s research paper ‘Five types of successful acquisitions’, there are five questions you should ask yourself before you acquire a business, or move towards consolidation:

  • Can you improve the target company’s performance?
  • Will consolidation remove excess capacity?
  • Will acquisition accelerate your access to the market you are targeting?
  • Will consolidation/acquisition give you access to skills faster than you can develop them yourself?
  • Are you picking a winner? Have you spotted them early, and can you help them develop their business?

You don’t necessarily need to answer ‘yes’ to all of these questions to move forward with an acquisition strategy – but it is important that you have at least considered them, and have tangibly mapped out where the value lies with your acquisition or consolidation plan.

Once you have moved down the acquisition pathway and grown your broking business – it is important to still seek support from third parties.

At PLAN Australia, we specialise in supporting groups who either write significant volumes or who want to leverage their size and scale to write more significant volumes. We are the only aggregator with a dedicated group for larger businesses, and we drive a specialised program designed to enhance their growth prospects even further.

In my next blog on business growth – we will begin discussing innovation, and how this is key to evolving your offering and keeping your customers happy.

Phil Quin-Conroy

Phil Quin-Conroy Linked in

Phil was appointed as CEO of PLAN Australia in May 2013. Previously Phil spent three years leading the broker services and operations department, responsible for the delivery of key business initiatives for the Advantedge group. During this time he oversaw and was accountable for the implementation of Podium, NCCP and On-boarding projects. Phil has over 20 years experience in the financial services industry; of which the last eight have been spent working closely with mortgage brokers. Previously he lead the Insurance & Licensee Services department at MLC. He has a passion for working with entrepreneurial, self-employed business owners and is able to draw on a global perspective, gained from time working in Australia, Asia and the UK. Always being one to enjoy advancing his skills and knowledge, this is reflected in his studies which include a MBA and studies in strategic leadership at Oxford University. In addition to work life, Phil is married and has two children and enjoys all that comes with family life, including the morning school drop off.

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