1. Deepens Position

An organization will often seek to strengthen its position within a market or customer segment and when it does, it is seeking to “deepen its position”. One of the tactics used to a market position is to provide an enhanced technology platform.

A resulting benefit from engaging in this strategy is that it “expands the moat” or increases barriers of entry for new market entrants and makes it more difficult for existing competitors to displace the firm.

An example of an acquisition that supports deepening the market position is when a firm acquires a target company who has a strong technology platform that will have wide-spread benefits to the acquiring firm.

2. Gap Filling

A gap filling strategy occurs when a firm seeks to fill gaps in its portfolio. While this strategy can also service to “deepen a market position” – gap filling tactics may be used to support “bolt-on” or “tuck-in” acquisitions where a series of these smaller acquisitions tend to have a larger effect.

An example of an acquisition that supports “gap filling” are those that fill a gaps in workflows or technologies. These kinds of acquisitions are not large but are immediately impactful in shortening the development time and complexity it would take for that business to offer similar capabilities.

3. Access to New Customers / Channels

Another tactical play that many firms look at is how to increase reach to customers – the shortest answer can sometimes be to acquire those customers via a channel play.

These types of acquisitions are strategically located in new market segments or in specific territories that are experiencing high growth. Companies have purchased distribution companies in target regions because of their relationship with customers – only to turn around and use that access to customers to promote and push its own product line. These kinds of acquisitions tend to provide more wide-spread coverage.

4. Financial / Operational Play

In certain instances, companies may seek to acquire target companies that have more cost-effective operational models. Alternatively, certain acquisitions have closed using a target companies well-built online marketplace as a justification for acquisition. Because the time and effort it would take to build the same would be too great.

5. Technology Acquisition

Unlike the other acquisitions which tend to be business-oriented acquisition strategies – a technology acquisition is a tiny addition and much smaller effort. These acquisitions only seek to acquire rights to specific technologies rather than the entire company. However, what often happens is that these kinds of acquisitions are in fact only technology and very little company infrastructure or brand legacy.

These types of acquisitions may start as a license or may go directly to acquisition depending on size.

Finally, in looking at acquisitions, some basic screening criteria used to review deals include: