Sandbox Blog

Acquiring more than one business increases chances of higher revenue growth by 66%

Key findings:

• Entrepreneurs who undertake a well-structured acquisition are 94% more likely to become high-growth businesses three years after an acquisition.
• Entrepreneurs who acquire additional businesses do so to grow, with 41% aiming to increase market share and 24% wanting to add a new business line.
• Buying a business can drive a company's growth. Firms that acquired more than one business were 66% more likely to have generated annual revenue growth of 10% or more in the last three years.
• Acquiring another business is good for revenue growth. Forty-six percent of small and mid-sized enterprises (SMEs) who acquired one or more businesses in the past 10 years said revenue growth was outpacing their industry average, compared to 38% of SMEs without an acquisition.

Entrepreneurs who acquire other businesses do so to grow, according to a new BDC study titled "Buying a Business: A Winning Strategy to Purchase Another Company in Canada". In fact, firms that acquired more than one business were 66% more likely to have generated annual revenue growth of 10% or more in the last three years.

The study finds that the key to a successful business acquisition is a well-structured process and good planning. Entrepreneurs who undertook a well-structured acquisition were 94% more likely to become high-growth businesses three years after an acquisition than firms that did not follow such a process.

"Acquiring another business is a great way for companies to grow, but good planning is vital to ensure the project is successful; following a well-structured process is a winning strategy," says Pierre Cléroux, Vice President, Research and Chief Economist at BDC. "Unfortunately, many Canadian businesses are leaving benefits on the table due to poor preparation. They often fail to take important steps, such as appointing a dedicated team to manage the project or preparing a strategic growth plan. Our research clearly shows that business owners can take specific steps to significantly improve their success in an acquisition."

Entrepreneurs identified securing financing and negotiating price and commercial terms amongst the most challenging aspects of an acquisition. Interestingly, 29% of entrepreneurs found retaining key employees difficult, which is higher than the 18% that mentioned negotiating purchase price was a challenge. The study covers the importance of a post-merger integration plan to overcome the challenges that follow an acquisition, with tips on how to deal with these issues.

The study, conducted for BDC by BPI Research, polled 1,038 entrepreneurs at SMEs involved in a completed or attempted acquisition in the past 10 years.

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ADP Canada, the leader in Human Capital Management technologies for Canadian businesses announced that it will be adding new artificial intelligence based technology on its ADP HR Assist^SM platform. The technology will deliver insights on employment law issues to its suite of services for Canadian small and mid-sized businesses (SMBs).

Through a new partnership with Toronto-based Blue J Legal, ADP Canada will provide SMBs with access to Blue J Legal's HR Foresight tool, designed to help HR professionals gain insights as to how the courts have previously ruled in several challenging areas of employment law. HR Foresight is the first tool to make predictions on likely outcomes of employment and workplace scenarios in the following areas of employment law: Reasonable Notice, Managerial Exemption to Overtime, Worker Classification, Duty to Accommodate Disabilities, and Drug and Alcohol Testing by leveraging machine learning on data from past cases.

"Small business owners already have enough on their plate – trying to stay on top of the latest in employment law and understand how it applies to situations in their own businesses can be next to impossible," says Sooky Lee, Division Vice President and General Manager, Human Resources Outsourcing at ADP Canada. "With the introduction of HR Foresight to our ADP HR Assist^SM solution, employers can utilize AI to allow them to gain a clearer picture of their obligations and risks under employment law, allowing them to make smarter decisions and keep more focus where it is needed – on their day-to-day operation."

This new functionality complements the existing ADP HR Assist^SM features, including access to tools small and medium-sized businesses need to help them handle their everyday HR needs, manage the risk of compliance issues and save time. This new partnership will further help ADP HR Assist^SM users navigate uncertainty in areas of employment law, by empowering them to run searches that will allow them to gain insights on past decisions and predictions on the likely outcome of their scenario. Business owners will now have access to a tool that can help make informed and confident business decisions.

"We're excited to extend the reach of HR Foresight to ADP Canada users nationwide through this partnership," says Benjamin Alarie, CEO, Blue J Legal. "The tool is a first-of-its-kind solution to use machine learning to predict outcomes that will help small businesses make more informed decisions."

There's a clear desire for technologies which help bridge gaps within workplaces and we are thrilled to be offering the HR Foresight tool. A 2018 study from ADP Canada showed that three-in-five Canadian workers (59%) said they believe A.I. and automation will have a positive impact on the workforce overall in the future. These new smart technologies help organizations maintain their bottom line while giving peace of mind to SMBs who do not have the scale or resources of larger organizations.

"New technologies and approaches like A.I. are more than just buzzwords – they are becoming foundational to improving the way that businesses of all sizes handle their day-to-day well-being," adds Sooky Lee, ADP Canada. "We're seeing how automation and affordable access to the latest technologies can help to level the playing field between small businesses and large corporations, much to the benefit of the little guy. By incorporating these new solutions in ADP HR Assist^SM we're making it easier for small businesses to adopt these latest technologies at a price point that makes sense for their operations, while providing them access to new tools that they may not otherwise be able to afford."

 

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For more information on ADP HR Assist^SM, please visit https://www.adp.ca/en-ca/solutions-for-business/small-business/hr-assist.aspx

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