Acquisition can be an important component of a PEO’s growth strategy. There is no one formula, so each PEO must ask itself some questions to determine which acquisitions fit into its growth strategy and business model. These questions will not pinpoint specific PEO acquisition targets but will help you identify the types of companies that will fit your strategy so you can align and narrow your search to find the companies that will be the best for your acquisition strategy and PEO business plan.
In 2012, Silva Capital Solutions, Inc. conducted a review of documented mergers and acquisitions in the PEO industry during 1995-2012. Consolidation of the industry has continued, and we have updated the original study to cover mergers & acquisitions occurring through 2016.
You’re an entrepreneur with amazing energy, drive, and enthusiasm focused on building your PEO. You are astonished by how right the market is for the very services you offer. Your team is dedicated to the highest levels of quality and ethical operations. You know you can beat your competitors simply by providing more personalized and intensive client service. Every article you read in the PEO Insider® says you’re in the right place t the right time. you provide the right products to a growing audience that wants your PEO services – what more could you ask for?
This paints a picture of your overall company. While short and concise, this section specifies why your PEO is different from others. It identifies strategic goals and objectives, and most importantly, summarizes your mission, vision, and values. For example, do you want to over HR administration or HR strategic planning, or both? Is your strategy to grow slowly and cautiously or to ramp up the business quickly?
Okay folks, let’s talk about the operational model for a PEO that chooses to grow through acquisitions in addition to growing organically. First and foremost, a PEO must have a strong operational base and senior management team/talent and prove it can manage internal growth before making an acquisition. If and only if a PEO has such strength can the company be a successful buyer.
Minority interest is defined as “a significant but non-controlling ownership of less than 50 percent of a company’s voting shares by either an investor or another company.” A minority investor can own a very small percentage or as much as 49.9 percent. In most cases, minority investors are not actively involved in the day-to-day PEO business.