The latest RMIT Activator Enterprise Insights survey – Are startups the M&A strategy of the future? – compares the attitudes and approaches to acquisition by both startups and established businesses.
The survey, which aims to break down barriers and define the acquisition of the future, reveals that 44 per cent of businesses are open to acquisition. It highlights four key trends:
- room to grow through startup acquisition – only 5 per cent of those businesses are currently pursuing “growth through acquisition” compared to 33 per cent focusing on “growing the market”
- growth and flexibility in demand – three-quarters of businesses express an active interest in startups demonstrating “rapid growth” and the “ability to sell anywhere”
- startups and acquirers in sync – “strategic fit” is the most important factor for both parties
- small business leads the acquisition market – 58 per cent of those open to acquisition were smaller (14 per cent sole traders, 17 per cent micro businesses and 27 per cent small businesses)
RMIT Activator Director Renzo Scacco said growth through acquisition was still seen as a secondary growth strategy by many companies, but the survey revealed the hidden compatibility between startups and acquirers that could spur growth.
"Overall, the results show a greater alignment of views than one would expect, which should prompt businesses to re-evaluate their risk assessment of startup acquisitions. Both acquirers and startups agree that strategic fit is the most important feature of an acquisition,” he said.
"This is also a reminder to our startup community to start thinking more strategically. Businesses want to work with people for the long term to recoup their investment and that means finding people who share their vision and can work within their team. There’s a lot of work to be done to minimise the perceived barriers between startups and acquiring businesses.”
Simon Martin, Executive Chair, iCareHealth UK, understands the apprehension involved with an acquisition after selling health tech company iCareHealth Australia to Telstra Health.
“There was a lot of agonising over whether we should sell and most of that was around the cultural and strategic fit. We were concerned they would crush us as a business. But the management team believed that they would be a really solid partner and assist in growing our market share. Strategic fit turned out to be ok, and our business grew, and culturally, Telstra knew they had to leave the team alone to get on with it,” he said.
RMIT Activator and SmartCompany hosted a business briefing in Melbourne to discuss the findings of the survey and their real-world implications. The panellists included Deborah Chew, partner at Hall & Wilcox; John Rowland, managing director of Unico Computer Systems; Stephen Crowe, founder of ESIC Hub; and Brendan Lee, Executive Director at Goldman Sachs.
This is the second survey in the RMIT Activator Enterprise Insights series. Upcoming surveys will address employability, the resilience and wellbeing of entrepreneurs, social enterprise and future jobs.
Story: Sarah Parkes