You have thought through your strategy and identified that you need to be in new markets, have new products and new capabilities. The next stage is to workout how you will implement these changes. You can either choose to Make them, or Buy them through acquisition.
The default option will always be organic. Companies are rewarded for value creation, not value purchase, and study after study shows that two thirds of acquisitions fail to create value. However, some valid reasons exist to Buy instead:
1) Sometimes, it can cost you less to buy. Currently, banks have been trading at below the cost it would take you to build them organically. Market entry acquisitions can avoid an expensive learning curve.
2) It usually takes longer to make, so acquisition could be valid if there is only a short window of opportunity in the market. Disciplined analysis will ensure this is not just an excuse for impatience!
3) Finally, it can be almost impossible to Make organically if the new opportunity does not fit your organisation’s current processes and values. You could start-up a completely separate organisation, but even this is high-risk.
The burden of proof should always be to have to prove that an acquisition is necessary. Organically, you can test as you go and confirm the validity of the assumptions fundamental to your new strategy. If you Buy, your testing may cost you millions of dollars.