Strategy & Innovation

How to innovate through External Growth?

Discover the associated resource

As already discussed in my previous article "External growth to develop your company", considering the acquisition of a company is a genuine way to innovate, an original lever to understand the hidden market as a reservoir of potential innovations. How to go about it?


An external growth operation brings together the resources of two entities in order to build a common project that is stronger than the sum of the companies alone.

In order to succeed, it is necessary to go beyond the financial vision of the transaction and to enter into a global and systematic process characterized by three key steps, the identification of targets, their qualification and the final reconciliation:



The process begins with a step that defines the framework of the search, in line with the strategy, while retaining the possibility of adapting it to the specific context of the identified targets. It is important that this starting point be reasonably broad because the success of the approach depends on the qualitative funnel effect of the matching process. This stage allows the characterization of possible growth paths (diversification, vertical integration, etc.). It is therefore essential to approach the subject with a very detailed understanding of the business (technical, industrial, sectoral, environmental, human, etc.) to transform innovation opportunities into growth targets.

"the success of the approach (...) relies on the qualitative funneling effect of the matchmaking process ... to transform innovation opportunities into growth targets."

The focus is on meetings and the constructive confrontation of company strategies:

Do not limit yourself to "NAF" codes, do not only contact companies "for sale" or those whose managers seem to be close to retirement are some of the pre-requisites. Why should you do this? Becauseit is always possible to reveal synergies when the approach is conducted with empathy and a fine understanding of the companies.
Moreover, "falling at the right time" is less and less rare in an economy where cycles are shortening, where managers are constantly listening to market demands.

It is then a matter of establishing an initial contact, with method and tact, in order to get past the initial contacts and discover the selected companies (about twenty), meet their managers, present the project and quickly create a favorable context for exchanges: talk about the potential of the merger, the mutual benefits, evoke positive synergies, share a common vision, because at this stage, it is not (yet) a matter of buying the company, but rather ofevaluating the alignment of values and company profiles.

"Falling at the right time is becoming less and less rare in an economy where cycles are getting shorter and leaders are constantly listening to market demands. "


By confirming or not the relevance of the merger, the second stage is also intended to limit unpleasant "post-acquisition" surprises. It is also at this stage that strategies can converge in order to get the best out of the envisaged association.
If tomorrow the companies get closer, each one must find its own interests in it, it is an operation of seduction during which must be installed the confidence indispensable to envisage the continuation. It is common at this stage not to talk about money, and therefore about valuation.
By reproducing this diagram for all the target companies we meet, we will be able to identify trends, desires, projections and, as a related benefit of the approach, an updated map of the players in the ecosystem. Each exchange allows us to formalize a vision of the target company, its potential and the concordance with the development project.
Among all these companies, some will appear to be more relevant than anticipated or conversely less interesting. Some of them were not for sale but will think about it because the approach leads them to think about a new horizon, perhaps more solid, more promising. Meeting this hidden market allows these opportunities to emerge.

"Some of them were not for sale but will reflect because the process leads them to think about a new, perhaps more solid, more promising horizon."


And then ... three or four projects will be selected to deepen relationships and more formal exchanges of information in order to build a possible project of rapprochement, this is the third step. It will allow the managers to get to know each other, share their visions and exchange their values.

At this stage, if the current is good, reinforcing the previous steps, the parties will be able to imagine a common project which will progressively integrate the necessary financial valuation and the synthesis of the validated synergies (if not, the discussions stop quickly without consequences).

The final milestone in the process is the formalization of the conditions of the merger in a letter of intent, which opens the audit phase (fiscal, financial, legal, social) or the "due diligence" phase, which allows the process to be concluded ("closing").
Beware! Selling one's company is not a common occurrence; the exercise is a heterogeneous mix of financial metrics, social factors, industrial durability, psychologies and personal affects. The whole thing remains in an unstable balance until the last moment. And until the last moment, it is therefore necessary to remain focused on the project and to listen.

In the end, innovating through external growth is based on two fundamentals: taking into account the human element and a thorough understanding of the businesses involved; it explores the potential of the "hidden" market in a broad and systematic way, without being limited to the financial transaction alone. And it is based on a structuring approach, progressing in successive and qualifying stages, iterating, using the codes of a classic innovation process.

Frédéric Chazelle

Expert in business reconciliation

Entrepreneurship is a renewable and universal source of value that makes the women and men who are inspired by it grow. Wherever it develops, new ways of seeing the world are emerging, new wealth is taking shape, and new spaces are opening up. It transmits to its ecosystem its confidence in the future and plays a leading role in developing the growth (in the broadest sense) of a country. Contributing to its blossoming and development has always inspired and guided my career. As a company founder and manager, before accompanying startups and fast-growing companies, I am now dedicated to bringing companies together.

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