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CharlesPhillipsIf you look at the Charles Phillips Crunchbase portfolio, you can see that one of the things that he has done over the years is to use his company to acquire other ones. All told, he has acquired 70 various companies, bringing them together into one corporation. This is an incredibly impressive feat, but it is also something that most modern companies are trying to do all of the time. Have you ever wondered why this is the case? As you look into it a bit farther, you will find that there are a few different reasons why companies will try to acquire one another.

Cutting Back on Competition

First of all, doing this can cut down on competition. If you are trying to do one thing in a specific market - selling running shoes, for example - and another company comes along and tries to do that as well, you have to compete with them for customers. Even if you both get exactly half of them, you are still getting just 50 percent of the sales that you want. If the two companies work together, though, they can get 100 percent of the sales and they can really thrive. Buying a company is often just a way to keep from having to compete with it.

Getting New Technologies

Sometimes, the other company might have something that you want, such as a new technology that allows them to create a better product. At the same time, you might have something that they want, such as a huge network that can get you a lot of sales.

It does not take much to see how working together would be beneficial to both sides. You can use your network to make sales and they can produce their products to make sure that you get return customers. On your own, neither company can reach its goals. You cannot put out the best product and the other company cannot get that product into the hands of the people who need it. Together, you can have a lot of success doing both things at the same time.

Finding More Workers

Often, what will happen is that one company will be expanding and growing so quickly that it cannot keep up with the demand. The company needs new workers, new plants, new factories and all sorts of other things to maximize on the demand and make a huge profit. They could buy land, build a new manufacturing center, and train workers, but that takes a lot longer than just buying an existing company and converting it slightly. This will usually only happen with two companies that are basically working in the same industry already, of course.

Entering New Markets

Finally, it can be a good idea to buy another company if you want to expand into new markets. Maybe you have been selling running shoes and you now want to get into leather dress shoes and hiking boots as well. These are similar enough that they make sense for your company, but still far different from what your plants are set up for right now. If you buy two new companies that are making these products, you can then put the products out under your name instead, launching you instantly into the new desired target markets.

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