Buying a Distressed Business: A Strategy for Growth Through Acquisition

Buying a Distressed Business: A Strategy for Growth Through Acquisition

Acquiring a business can be a capital and time efficient part of a strategic business growth strategy, especially when acquiring a distressed business making the transaction particularly capital efficient. As an established business much of your foundation and processes are already built, so identifying resources within a distressed business that can be integrated into your current business plan is a great way to build the value of your company. Below are some key aspects to consider that an established business can utilize in a growth through acquisition of a distressed business strategy.


HORIZONTAL GROWTH. Horizontal growth is the expansion of a company’s services across a geographic region, range of services, or product line. Imagine you’re a company that produces salsas, and a hot sauce company becomes available for acquisition. The product would fit great within your current product line, and you already have the relationships and protocols in place to sell that product.


VERTICAL GROWTH. Vertical growth involves a business taking over a function that was previously performed by a supplier or a distributor. In the example of our salsa company, if they came across a company that produced the glass containers they use to package their salsa - that would be a great vertical growth acquisition.


EMPLOYEES. In Colorado especially, sourcing new employees can be difficult because of the extremely low unemployment rate. This can be particularly true in many of our very active construction companies, and the labor trades. Identifying a construction company for sale that has a large, trained staff in place would make a great acquisition to add to the established business’s workforce.


LOCATION. Another limited resource in Colorado can be specific, popular locations, or commercial space. Consider the franchise business looking to break into the downtown Denver retail market, through the acquisition of a distressed gift shop business they can acquire the exact location they’re looking for, and develop a build out to suit their business. We often see this strategy with businesses who own warehouse space in Colorado, which has become highly popular among hemp and cannabis businesses.


CUSTOMERS. Customers and their information are very valuable in this day and age. Buying into a salon business that already has a large customer database to market new salon services to would be a great way for an established salon to continue to grow in their market and gain additional business.


ASSETS. Assets like construction equipment or production machinery can be very expensive. But it is not uncommon for a distressed business to sell for the cost of their assets, making them very attractive to an established business with limited capital to spend on new assets to continue to push their growth.


One of the main reasons an entrepreneur would want to buy a distressed business is the depressed price, but it can also offer key resources in support of a strategic growth plan. For more information on the business acquisition process or to view our distressed businesses, we invite you to schedule a free consultation with a broker, or visit our website.


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Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!


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