Acquisition as a development strategy. This is the bet of several digital start-ups that, more than developing new market niches, geographic areas or products, decide to get their hands on other companies.
Some have become experts in the field… Ambitious entrepreneurs, at the head of already large structures, regularly bet on growth through acquisitions. For example, the Brussels Efficy group, specialist in CRM (Customer Relationship Management), has bought around ten companies since its creation in 2005… including three in 2021 alone. Same strategy for the Flemish digital marketing group Intracto (now iO) which integrated no less than 25 digital agencies. Or to UnifiedPost, an expert in optimizing the electronic processing of invoice flows and other administrative documents, based in La Hulpe.
Some have become experts in the field… Ambitious entrepreneurs, at the head of already large structures, regularly bet on growth through acquisitions. For example, the Brussels Efficy group, specialist in CRM (Customer Relationship Management), has bought around ten companies since its creation in 2005… including three in 2021 alone. Same strategy for the Flemish digital marketing group Intracto (now iO) which integrated no less than 25 digital agencies. Or to UnifiedPost, an expert in optimizing the electronic processing of invoice flows and other administrative documents, based in La Hulpe. There is nothing unusual about making acquisitions for these companies when they want to position themselves in an unknown sector, a specific market or find new talent. These companies are inspired only by the giants of Silicon Valley, which are among the world champions in buying boxes. That said, more modest startups sometimes choose this expansion path as well. Even when they are recording losses… This summer, for example, several young Belgian digital shooters announced the results of their purchases. The e-health platform Rosa took over Umbi, its Flemish competitor. Online organic brand Kazidomi has done the same with French websites Smartfooding and Graine de bonne santé. And even more recently, the French-speaking Belgian sports club management platforms iClub and BigCaptain announced a similar operation (see box). The reasons behind these acquisitions can be very different. Alain Etienne, founder with Emna Everard of Kazidomi, justifies the acquisition this summer in the interest of increasing his customer base. “The company we are targeting operates two sites: Smartfooding and Graine de bonne santé,” he explains. We found that integrating them made it possible to capture sales in references similar to ours and to maintain synergies: purchasing, logistics, etc. This also strengthens us in certain markets, in particular gluten-free, parenting, childhood… What we value in these acquisitions are mainly the customer listings and the knowledge of these market niches”. that “it’s not about huge investments.” But he details his calculation: “Here, we’re in a mechanism where we’re able to buy less than our marketing costs us. The operation is also deducted from the marketing budget. In addition, this allows us to have more scale, to reduce cash consumption, as our orders are more profitable. The goal is to get enough volume to break even.” For Rosa, Sébastien Deletaille’s healthcare start-up who announced the acquisition of Umbi at the end of the summer, the motivations are a little different. Rosa, which aims to become the leading healthcare mobile application in Belgium, currently offers systems for booking appointments with doctors and specialists. But since late 2021, she also wanted to offer this service to hospitals. An area where Umbi took the lead… “The acquisition of Umbi allows Rosa to accelerate the understanding that we can have of the hospital, explains Sébastien Deletaille. To better understand the hospital market and avoid costly development and R&D waste, Umbi already had Not to mention that acquiring a company that already had six collaboration agreements with hospitals was a great opportunity: we therefore immediately buy links with six large customers, without going through any conversion cycle, which can be quite a long time with players like hospitals.” Getting your hands on a young shoot that has taken a little lead in a niche therefore also saves time. “For startups that want or need to move quickly, notes Joffroy Moreau, founder of consultancy Ekkofin, an acquisition is a more strategic transaction than for a large, well-established group, he has time in his sights. cash equivalent that allows you to penetrate the market faster than doing it yourself, that makes sense.” This is particularly the case for international development. Some companies that want to grow abroad buy companies active in the countries where they want to start their activities. This was, for example, the model followed by Sortlist, the Belgian platform for contacting marketing agencies. The company moved to Spain in 2017 through the acquisition of its (small) local competitor The Briefers, which had four people. “This option saves time,” Nicolas Finet, co-founder of the scale-up, confirmed to us at the time. We would take twice as much time alone. Here, we can count on a motivated country manager and a team. got Agenturmatching, a German competitor, to attack that market. The speed argument was also presented here: the declared desire was clearly to gain time, relying on the experience of the local team, who knew the operation and the local market. “We can estimate that we gained two years”, slipped the co-founder of the company. But when it comes to acquisitions, there are as many scenarios as there are start-up strategies. “Some companies may be interested in additional patents, notes Joffroy Moreau. Or in teams, especially when you’re in a specific market and it’s difficult to recruit leaders there.” And so some acquisitions can be dictated by very specific financial strategies: a business owner may want to increase their revenue through an acquisition to increase their “metrics” before raising funds or reselling… We won’t be surprised, therefore, not necessarily to see sprouts young people recording losses each year embarking on such acquisitions. “In the context of an acquisition by a start-up, profitability does not matter, as what is valued is essentially its ability to succeed”, explains Joffroy Moreau. If the acquisition is justified in this race for success, no problem. Especially since, in most cases, the start-ups that embark on purchases “do it with capital”, continues the expert at Ekkofin, therefore with the help of their investors. Especially if they don’t have enough cash flow to get bank credit. However, very fast – growing technology startups burn money.” The expert, however, gives advice: study the value of companies well and avoid buying a box worth more than half of the start-up. failure, is the indebtedness and the destabilization of the company. “We must avoid hasty precipitation”, warns Joffroy Moreau. In fact, even if it promises to offer many opportunities, an acquisition is never trivial. And the reasons for a failure can be several. One of them : the loss of talent. Getting a team involves a lot of onboarding work, that’s obvious. Without that work, the acquired company’s teams run the risk of not finding their benefit, not adhering to the acquirer’s culture… and leaving the new company structure. This is what a Belgian IT group experienced when it acquired a start-up. Culture shock got the better of the team. In one big year, almost everyone left the company. This special attention given to corporate culture , Sébastien Deletaille, CEO of Rosa, is extremely compelled to do so. Both to establish a specific culture in their start-up and in view of the acquisition of Umbi. “Culture is a big challenge, insists the entrepreneur. It is possible to integrate a small structure into a slightly larger structure; I think the proportion 3 or 4 is the right one for this to happen without problems. But of course you need values shared During the financial due diligence phase, we also perform due diligence with employees. As Rosa and Umbi’s missions are well shared, we are convinced that the majority will adhere and remain within the new structure.”