Why the Strategy Works: "One plus One equals Four"
The most successful acquisitions create synergy. We use the phrase “One plus One equals Four” to describe a concept that is core to Cogent Growth Partner’s mission: The value of a truly successful acquisition is greater than the sum of its parts.
Succesful Growth by Acquisition is all about fitting the parts together as seamlessly as possible. During initial target research and subsequent Due Diligence, we explore potential synergies. We compare and analyze product lines, costs of service delivery, cross-selling opportunities, and overall economies of scale.
The result is acquisition of a stream of incremental recurring revenue that realizes margins that are far higher than either the acquired or acquiring company could achieve on their own. We accomplish this by shedding duplicate expenses, identifying and realizing economies of scale, and supporting the new revenue with existing delivery capacity. For these reasons, an accretive acquisition strategy not only increases the volume of top line revenue and bottom line contribution, it also increases the margins the business achieves overall.
That means a compounding benefit in net cash generation and a corresponding increase in enterprise value of the acquiring company – usually by a significant factor. In fact, the post consolidation value of the acquiring company is very often several times its original value, even after factoring in acquisition costs.