How to grow a SME by acquiring other companies: a comprehensive guide for CEOs and executives

Inorganic growth (growing through the acquisition of companies) is no longer the exclusive domain of large corporations or venture capital funds. More and more SMEs, especially in the technology sector, are turning to acquisitions as an effective way to accelerate their expansion, strengthen capabilities and increase shareholder value.

In this guide, we explain clearly and practically why and how an SME can grow through acquisitions, what benefits this brings, what risks need to be managed, and what best practices our M&A advisers recommend for carrying out a successful transaction.

Why should SMEs also consider growing through acquisitions?

Although inorganic growth has traditionally been associated with large groups, today it is an accessible and transformative tool for well-managed SMEs with strategic vision and integration capabilities. Recent evidence confirms this.

Accelerated growth and higher returns for shareholders

Companies that grow through acquisitions grow faster and generate greater value for shareholders. According to Bain & Company, inorganic growth improves both performance and value creation. For a technology SME, this means accelerating years of development in a single strategic operation.

Immediate access to talent and new capabilities

In a market where skilled talent is scarce and building internal capabilities takes time, acquiring companies allows you to obtain:

• Specialised teams
• New technological capabilities
• Validated operational processes

Harvard highlights that 60% of acquisitions in the tech sector are made to incorporate capabilities that do not exist internally.

Rapid entry into new geographical markets

Many Spanish SMEs are looking to expand into Europe or Latin America, but doing so organically is slow and risky. Experience shows that the inorganic route offers faster, safer and more scalable access.

Economies of scale and margin improvement

The increase in size allows synergies to be captured, such as:

• Cross-selling: offering more services to the same customers
• Savings on central services
• Better bargaining power with suppliers
• Operational and process efficiencies

These synergies not only improve margins, but also strengthen competitive positioning.

Best position for a future sale

Corporate buyers and funds highly value SMEs that have already successfully executed acquisitions, as this demonstrates management capability, operational maturity and integration, increasing their attractiveness and valuation in a future sale.

Access to specialised financing

Growth through acquisition of companies opens the door to non-bank financing, with longer terms and tailored structures designed specifically for corporate transactions.

Before purchasing: strategic fit comes first

One of the most common mistakes is to discuss price or multiples without first defining the strategic fit of the transaction.

Key questions before moving forward

• Does the target operate in a similar or complementary market?
• Is there alignment in product, technology and value proposition?
• Is there an overlap or complementarity of customers?
• What real synergies could be captured?

Without a clear fit, the operation will lose its meaning, even if it seems financially viable.

Synergies: the real source of value creation

Identifying them correctly is essential for any analysis of company acquisitions.

Cost synergies

• Elimination of duplication in core areas
• Operational efficiencies
• Supplier consolidation
• Process standardisation

Revenue synergies (the most important ones)

• Cross-selling between portfolios
• New combined offers
• Greater commercial outreach
• Integration of technological capabilities

Synergies should be estimated bottom-up, avoiding generalisations such as ‘we will save 10%’. To assess them correctly, it is advisable to use discounted cash flows, incorporating:

• Time required to capture them
• Actual probability of obtaining them
• Risk-adjusted discount rate

Integration: where the operation is won or lost

Poorly managed integration is one of the main causes of failure in acquisitions; therefore, it must be planned before the deal is even closed.

Integration of people and culture

It is one of the factors that most determines success:

• Identify the key team members
• Build trust while continuing to deepen analysis
• Managing sensitivity and expectations
• Planning internal and customer communication

Technological integration

Particularly critical in tech companies:

• Financial reporting
• Internal and operational systems
• Commercial processes
• Technological platforms and tools

Homogenisation must begin soon.

Customer experience

A common mistake is to underestimate this point. Poor communication or a decline in service quality can destroy the value of the operation.

The ‘100-day plan’

It is the most effective methodology for coordinating integration:

• Specific actions
• Responsible parties
• Deadlines
• Milestones
• Expected synergies

This plan must be prepared before closing the transaction

Real-life examples: how companies like yours are applying it

Case 1: Becolve acquires Monolitic

Becolve, specialising in industrial software, acquired Monolitic, specialising in hardware.

• Strategic motivation: perfect complementarity between software and hardware capabilities.
• Result: greater range of offerings and cross-selling capacity.

If you would like to know all the details of this transaction, here is an article where we discuss how Baker Tilly acted as advisor to Becolve in the purchase of Monolitic.

Case 2: Giunti accelerates its expansion in Latin America

Giunti, an Italian psychometric tools company, acquired a leading company in Latin America.

• Motivations:
  • Quick entry into a new
  • Expansion into a new line of business

• Result: accelerated its internationalisation and consolidated its new business unit.

You can find out more about this transaction in this article: Baker Tilly advises Giunti on the acquisition of ADIPA (Chile) .

Company acquisitions as a lever for transformation in SMEs companies

Growth through acquisitions enables a technology SME to:

• Accelerate its growth
• Increase shareholder value
• Strengthen strategic capabilities
• Entering new markets
• Improve its competitive position
• Better prepare for a future sale process

It is not a risk-free path, but with clear strategic planning, rigorous due diligence and well-executed integration, acquiring companies can completely transform a company's trajectory.

If you are considering acquiring a company or want to assess whether your SME is ready for inorganic growth, our team of M&A advisors at Baker Tilly Tech M&A can help you analyse your case and define the right strategy.