Why acquisition helps expand your franchise overseas
Ready to expand your franchise overseas? While it's a tempting step to take, getting it right can be a challenge. Here CEO of Poolwerx, John O’Brien shares his tips for successful preparation.
PoolWerx is poised to take on the US market as the first step in its international expansion strategy. Key to the development of the American business is acquiring a home-based franchise chain. O’Brien, says there were a range of reasons the company chose to expand overseas through acquisition, and why the company waited so long to make the move.
“Poolwerx has been considering expansion since 2007, when we first began looking into taking the brand internationally.
“We decided on acquisition for a number of reasons. It is the fastest way to expand, if done properly it has the greatest immediate financial benefits, and it also allows us to maintain complete control of our brand. It also has the added benefit of removing a competitor before you even begin,” he says.
In the following Q&A, O’Brien recommends some key steps to ensuring that an overseas acquisition is a success.
1. Is your business ready for acquisition?
Before considering acquisition, your company must be in a strong enough position to support the cost and energy that will be needed. An acquisition will take twice as long as you think and will cost three times as much.
I would recommend that a company control at least 10 percent of their domestic market prior to any thoughts of expansion through acquisition.
You will also need to have people who are experienced enough to take control of certain aspects of the business while you are engaged elsewhere. You can’t be everywhere and control everything, so you need a team that you can trust to make the right decisions for you. This can only be developed with time, so patience is necessary.
Even a well-established company with a strong domestic market needs to take its time to properly develop its acquisition plans. Prior to even contemplating businesses to acquire or countries to move into Poolwerx spent over 12 months and significant resources putting our global strategy in place. Thanks to this we knew exactly what we wanted and how to go about achieving it when the time came to look at destinations and companies.
2. How do you decide on a location?
Poolwerx initially decided to expand into the US due to the enormous opportunity for growth it offered. With 10 times the number of swimming pools across the US as in Australia, and minimal competition in our market, we knew that it would provide maximum growth potential.
The US also offered a financial model similar to ours, and removed the challenge of a language barrier.
While the US was the ideal location for Poolwerx, it won’t be so for all businesses, so make sure you do your research into which location will offer the best opportunity for success for you.
Take into consideration:
- Customer demand
- Current competition
- Financial benefits and disadvantages
- Legal requirements
- Any communication barriers
3. How to decide on a business to acquire?
The most important step, choosing the right business to acquire, can make or break your acquisition success. Over the last 10 years Poolwerx investigated three other acquisition opportunities but passed them up because they weren’t exactly right.
When looking at possible businesses I would recommend considering:
- Do your company values match?
- Will you be able to work with the business owner to make the acquisition process as smooth as possible?
Thorough due diligence is vital; never be afraid of walking away from a deal that you decide is not right for you.
4. How will overseas acquisition affect the domestic company?
In 2008, while considering a previous acquisition prospect, we made the mistake of discussing the possible expansion with the entire network. This resulted in a huge amount of stress as franchisees wondered how the expansion would affect them. This time, we waited until we were sure we were going to acquire the business, and prepared a list of key messages to share with the network as soon as we knew the deal was certain. This ensured that all members of the franchise were well informed and felt reassured that the expansion would be a positive step for everyone.
Overseas acquisition can provide a business with a fast track to international growth. With the right planning and preparation it will be a beneficial experience for business owners and franchisees.
- Want to find out more about overseas expansion? Check the video Is your franchise ready for international expansion, and legal advice on protecting your IP overseas.