What is a bolt-on acquisition?
It's when a business buys another company in order to merge it into one of its business divisions. It's also called a tuck-in acquisition. This strategy is often used to buy companies that have made a technological breakthrough, or have found success with a niche that complements the existing business of a larger, more established firm.
Where have you heard about bolt-on acquisitions?
Like its main competitors Amazon and Microsoft, Alphabet – the company behind Google – has made a series of bolt-on acquisitions in recent years to expand its influence in the technology and computing market, buying businesses that focus on mobile app software and cloud storage.
What you need to know about bolt-on acquisitions.
For the company doing the buying, bolt-on acquisitions can potentially increase revenues, and broaden capabilities and resources. It may enable the business to expand into a new niche of the market, or it may just be more cost and time effective to purchase a competitor than expand and grow organically.
For the company that gets bought there are benefits from having the backing of a larger, more developed business – whether it is increased investment and expertise to get their product to a wider market or a more established infrastructure that can help it to grow.
Despite the potential benefits though, the integration process can be tricky. The acquiring company will expect the bolt-on company to integrate quickly into established systems and procedures and this may be jarring for a company with its own embedded culture and way of working.
Find out more about bolt-on acquisitions.
Due diligence is an important process in any acquisition. Find out how careful due diligence can increase the likelihood of success of a bolt-on acquisition.