How Acquisitions Accelerate Growth: Strategies from an Automotive Industry Insider
As the automotive industry undergoes rapid transformation, acquisitions are proving to be a key strategy for companies looking to grow. Seth Getz from NuVescor spoke with Ron Hesse, Chairman and CEO of GlobalAutoIndustry.com, to discuss the benefits, challenges, and opportunities of mergers and acquisitions (M&A) in today’s market.
Hesse, a recognized expert in the global automotive sector, shares valuable insights on why acquisitions serve as a powerful growth tool, especially in uncertain times.
Acquisitions vs. Organic Growth: Why Speed Matters
Hesse highlights the fundamental difference between organic growth and growth through acquisition.
“You can grow your company yourself, setting up a greenfield operation, which takes time and allows you to design everything to meet your exact needs,” Hesse explains. “But acquisitions can get you there much quicker. You’re stepping into an existing operation with an established customer base and infrastructure.”
Seth reinforces this by referencing Tesla’s acquisition of Maxwell Technologies. “Instead of starting from scratch, Tesla acquires Maxwell for its expertise in supercapacitors, allowing them to leapfrog competitors,” Seth notes.
Key Benefits of Acquisitions
Hesse outlines several compelling reasons why companies pursue acquisitions, emphasizing their ability to offer more than just speed to market:
1. Access to New Markets
“For U.S. companies, entering markets like Mexico offers significant advantages,” Hesse says. “It’s not just about lower costs—Mexico’s extensive free trade agreements make it a gateway to global markets.”
2. Expanding Manufacturing Capacity
Acquiring existing facilities proves more efficient than building from scratch. “A manufacturing plant is an asset that saves time and offers immediate capacity,” Hesse points out.
3. Gaining New Customers
“Sometimes acquiring a company is faster and cheaper than developing new customer relationships,” Hesse explains, emphasizing the immediate access acquisitions provide to a built-in customer base.
4. Talent Acquisition
Hesse introduces the concept of “aqua-hiring,” where companies acquire businesses to gain skilled teams. “In Silicon Valley, and increasingly in automotive, talent is often the most valuable asset you can acquire,” he notes.
5. Acquiring New Technology
“When the industry begins transitioning from internal combustion engines to EVs, many suppliers opt to acquire startups with EV expertise rather than develop the technology in-house,” Hesse explains.
6. Supply Chain Access
Acquisitions provide critical access to raw materials or specialized suppliers amidst supply chain disruptions. “Battery technology is a prime example, where companies seek acquisitions to secure resources dominated by other regions,” he adds.
Domestic vs. International Acquisitions
When it comes to acquisitions, the decision between domestic and international opportunities is crucial. Hesse emphasizes the importance of preparation for international ventures.
“If you’re a domestic company considering an international acquisition, you need experience exporting to those markets first,” he advises. “Understanding the legal, cultural, and operational environment is essential.”
He recounts a cautionary tale of an Indian company attempting to acquire a European firm without proper preparation, resulting in a failed deal. “They didn’t understand the cultural and legal landscape, and their lowball offer insulted the seller,” Hesse recalls.
The Role of Nearshoring in M&A Strategy
Getz and Hesse dive into nearshoring, a trend gaining traction in North America and Europe.
“Nearshoring is about bringing your supply chain closer to home,” he explains. “Instead of relying on components from Asia, companies source from the U.S., Mexico, or Canada, reducing lead times and increasing control.”
Chaos as Opportunity
One of Hesse’s most compelling insights is his mantra: “Chaos is opportunity.” He explains how turbulent times create unique openings for strategic acquisitions.
“The transition from internal combustion engines to EVs creates chaos in the industry,” Hesse notes. “This is when bold companies acquire distressed but valuable businesses at a discount.”
Seth echoes this sentiment: “Good times make doing business easy, but it’s during challenging times that the best opportunities for acquisitions arise.”
Preparing Your Company for Acquisition
The conversation touches on the seller’s perspective, with Hesse highlighting what buyers look for in potential acquisitions:
- Strong Financials: Cash flow remains a critical factor.
- Market Access: Companies with established customer and supplier relationships are highly attractive.
- Skilled Teams: The right talent can be a deciding factor.
- Strategic Fit: Buyers often seek complementary product lines or technologies.
“If you’re thinking of selling, consider what makes your business attractive,” Seth advises. “It’s not just about financials—it’s your team, your market reach, and your access to resources.”
The automotive industry continues its transformation, and acquisitions offer a fast track to growth and innovation. Successful acquisitions require preparation, whether domestic or international, but they unlock tremendous value in new markets, technology, and talent.
“Chaos equals opportunity,” Hesse reminds. For businesses ready to embrace the challenges, the rewards can be game-changing.
To learn more about Ron Hesse, visit GlobalAutoIndustry.com for additional resources and insights.
