Strategic Advantage Trumps Profitability
An MSP business is often concerned with M&A (Mergers and Acquisitions). Many who follow M&A strategies are after profit, but that’s really only the tip of the iceberg. Additionally, like an iceberg, in the wrong climate, the heat of business can melt the ice of M&A, at which point all you’re left with is a big puddle of nothing. So you’ve got to look at tangential advantages. An iceberg can preserve a climate or change the seas around it. Or think of a glacier— glaciers often carve channels or valleys which beautify a region and facilitate ecological expansion.
If your M&A deal was a glacier and you were investing in the ice, you’d lose everything eventually. However, if your glacier M&A deal had to do with the strategic advantage coming from that which the glacier left behind, suddenly you’re in good shape. You’ve got a permanent valley carved through the mountains that develops into a unique IT ecosystem which is self-sufficient.
These are the primary benefits of positive M&A deals: tangential advantage capitalized on through effective strategy. Additional notable pros to this mode of IT provision include:
• Quantifiable growth potential of substantial dimension
• Rewards that are immediate
• Expanded pricing power in supply chains
• Complementary synergy
• Competition elimination
Organic vs. Inorganic Growth
Here’s where the analogy breaks down. Glaciers are natural events, M&As change the trajectory of a given business— they are “inorganic,” if you will. So let’s do a little thought experiment. If you had the resources and ability to use glaciers in your landscaping endeavors, you could create permanent calculated solutions. You could also have a real disaster on your hands; an entire mountain town could be wiped out. This means anyone with resources to perform such an action would need professional expertise informing their forward movement. They would need people who have gone before them and understand the topography of the landscape down which the M&A glacier will slowly slide.
The only real cons to M&A solutions are transfer risk and the high initial expense which characterizes such a deal. Considering the potential advantages, an MSP business deals of the M&A variety stand to serve those orchestrating them positively if properly conducted. If you’re merging with a company or acquiring a company that you are familiar with, this diminishes transfer risk substantially. If you budget such that should the M&A deal fall through, your company doesn’t lose integral assets, then you’ll survive even if things don’t go as planned.
Still, you’ve heard the old phrase “If you can’t beat ’em, join ’em.” When you merge or acquire competition, you take their skill and combine it with yours. This gives you a strategic advantage. Synergy can be increased when one company controls what were previously two— though with any M&A deal, you want as much “natural” synergy as can be sustained.
When you’ve bought out a company or managed to combine with one, your supply chains are likewise made one. This means you can statistically diminish the cost for the dissemination of goods or services. To top it off, many of the advantages detailed here happen almost immediately. Profit may not hit for a few years, but operational advantages begin to apply almost as soon as the ink is dry on your M&A contract.
As your company increases its resources, it increases its potential for growth and stability. Think of two drops of water sliding down a window pane and coming together. Together, the drops weigh more, so they fall faster— they get to their destination more quickly. Now think of a glass of water as opposed to a teaspoon of it. The more you merge and acquire, the greater your company’s “liquid” assets become, which allows you to truly be like water. Remember the famous Bruce Lee quote? The water fits any receptacle in which it is placed— if there’s enough of it. A startup raindrop can only conform to so many shapes. A lake of success begins to conform surrounding topography to its own shape.
Boiling it all down, when it comes to M&A deals for your MSP business, you want professional solutions that can help you get the job done. With M&A, high advantages overcome predictable risk.