As the pandemic rages across the globe, most small, medium, and large businesses all struggle to stay afloat. In destruction, though, lie the seeds of rejuvenation and growth.
What is happening today?
Consumers are scared, only essential goods and services are being consumed, discretionary spend has been cut down to the bone, debts are ballooning, layoffs of even the best workforce are being forced upon businesses, banks are facing the specter of non-performing assets that will make it difficult for their balance sheets to fund, post-COVID, good company. Risk averseness will be the order of the day, as had happened during the last financial crisis.
Some of the stressed assets that are either debt-free or have small amounts of debt on their balance sheets, pre-COVID had a good customer base which post-COVID can be scaled up will be great acquisition targets.
Unconventional growth strategy:
A business with a great vision, execution strategy and scalable architecture can adopt an unconventional growth strategy. This can include acquiring a stressed asset as a business jumpstart strategy. Acquisition per se is often a standard business strategy adopted to grow a business footprint, enter new market segments, strengthen a portfolio, diversify, and derisk a business.
I know this is not a normal way to build a startup/ small business but unconventional though it may sound, it makes business sense. Startup/small business investors are business people. They will post Covid look at anything which will give them a less risk-free return.
The same logic can be applied to other businesses too. Remember, stressed assets can be procured at a very attractive price. I have, in my experience, seen a stressed asset procured at zero cash outflow.
What should be the next steps for me, a business that wants to explore such an unconventional growth strategy?
The global pandemic should start ebbing by the end of this year. By that time, mass inoculation of one of the vaccines under development would be truly underway. We have, therefore, time from now to the end of the year to put this strategy into action. This will call for taking the following steps:
- Identify target acquisition candidates
- Undertake business due diligence to validate their relevance to your growth strategy (Don’t worry, business due diligence can be done remotely, and consultants do not need to travel to do on-location visits)
- Once the candidate has been identified through the due diligence process, prepare a term sheet
- Negotiate and sign the agreed term sheet
With the term sheet in the bag, you can initiate the process of formal due diligence, which will require you to mount a full team who will do the proper due diligence on the finances, business establishments, workforce, business processes, customer validation, risk assessment, and prospect assessment. The growth strategy is applicable even in the post pandemic world.
About the author:
We are an end-to-end natural solutions-focused services corporation. We are registered in Delaware State. If we can be of any assistance, do write to me. To know more about us and our services, look at our webpages www.sudhirahluwalia.com.