Mergers and Acquisitions: Everything You Need to Know About Expanding Your Business Portfolio

UPDATED: October 13, 2023
PUBLISHED: October 21, 2023
Two Black businessmen shaking on a merger and a acquisition in a nice office

In 2021, Hornblower Group, a global leader in world-class experiences and transportation, announced the launch of City Experiences, a water- and land-based portfolio of offerings. The company achieved this launch by merging with Walks, a leading sightseeing tours operator, and Devour Tours, a European food tour company. Hornblower Group became a combined entity of one-of-a-kind travel experiences (land, food and water) in top tourism destinations around the world.

In 2022, the company expanded even further with the acquisition of Journey Beyond, an Australian ferry operator and tours provider. Today City Experiences represents a diverse portfolio of offerings in major travel destinations worldwide, providing a broad range of global experiences for locals and tourists alike.

“Part of our growth strategy is to build upon and develop our business portfolio by supporting Hornblower Group as a global experiences and transportation leader,” said Kevin Rabbitt, chief executive officer of the Hornblower Group. “We look to pursue unique and attractive opportunities that strengthen and expand our experiences, while exposing us to new areas of growth.”

What is a merger in business?

In the ever-changing world of today’s business, mergers have emerged as powerful tools for companies seeking growth, a competitive advantage and increased shareholder value. These strategic unions, as in the case of City Experiences where two or more organizations come together to form a single entity, have reshaped industries, created market leaders and transformed the way we do business. However, the road to successful mergers is full of challenges, uncertainties and complexities—personal, regulatory and cultural.

This begs the question: When is the right time to merge or expand your business portfolio? What motivates a merger and how do you decide who to merger with? To understand the world of mergers, we need to understand motivations driving corporate unions, dissect the various forms they can take and uncover the keys to their success or failures.

What is the motivation for mergers and acquisitions?

“I frequently discover that the primary motivation behind mergers is the chance for a business to expand by affiliating with a larger brand or company,” says Maggie Lord, a business coach and founder and CEO of Rustic Wedding Chic. “This is especially true for smaller brands who find a merger a great way to expand both their financial and human resources by joining a larger company.”

Digging a little deeper into the motivation opens up the opportunity to strategically analyze what is important to a business. Matt Langner, a business coach, VC Expert and founder of Langnerd Business Coaching, suggests the following four key indicators to consider.

  • Gain access to new talent: Attract and retain top talent, which is essential for a competitive advantage.
  • Expand into new markets: Expand your geographic and digital reach, targeting consolidation of market share or diversifying its portfolio to reduce risk. 
  • Accelerate innovation: Technology integration can bring new products and services that meet the needs of customers, improving the overall experience.
  • Economies of scale: See if it’s possible to produce goods or services at a lower cost per unit. This can lead to increased efficiency and more revenue generation.

When is the right time for mergers and acquisitions?

“Businesses are most appealing for a merger or acquisition when they are thriving and successfully solving a problem in their industry that a larger company can acquire faster than building it themselves,” notes Lord. To recognize when a business is ready to merge, Langer says businesses need to look at many different factors, like market conditions, technology, policy and regulation or financial performance. If the market is growing rapidly, like tourism—World Travel and Tourism Council predicts growth to reach $9.5 trillion, just 5% below pre-pandemic rates— this could signal the opportunity to gain a larger market share, which is exactly what City Experiences did. 

Speaking about the strategy behind the merger, Rabbitt says, “Despite the challenges that the COVID pandemic posed to the travel industry, we made investments and acquisitions both during and after the pandemic that have positioned us as a leader in extraordinary and memorable experiences. This forward-thinking leadership enabled us to scale up and provide our guests with more offerings in the wake of the pandemic, when we saw a pent-up demand for travel.” 

New technologies that improve the user experience or solve a business problem are another great way to identify opportunities. Finally, financial performance issues can present favorably to a merger.

What are the benefits of mergers and acquisitions? 

There are a few different ways to think about a potential merger—one that helps with expanding the current portfolio with complementary offerings (horizontal expansion), or the other that helps diversify the portfolio with different offerings (vertical expansion). Of course, the third approach is to find one that does both. 

This was the case for City Experiences. “Walks and Devour were established brands with, collectively, hundreds of unique, beloved tours led by experienced guides across more than a dozen cities,” Rabbitt notes. “The merger not only gave City Experiences the chance to expand our portfolio of offerings, but it also gave Walks and Devour the chance to expand their reach into destinations with untapped potential, further contributing to our collective success.”

Langner agrees that the future state of macro-industries (those that offer a suite of products and services under one umbrella) is prompting the need to generate partnerships in diversified industries.

What are the risks and challenges with mergers and acquisitions?

As with any merger, it is important to recognize the challenges that come with combining entities. It is a time-consuming commitment that should be driven by long-term strategic goals. It could impact human capital and employees, especially if departments are being consolidated. “Mergers often lead to employee anxiety about job security, roles and a possible new reporting structure,” Lord cautions. “Clear communication and transparency are essential to address these concerns and retain valuable talent.” Other factors like systems, IT integrations and regulatory impacts are also important to consider.

As we see with City Experiences, acquisition is one of the best ways to grow and expand market share. If done correctly, it can launch you over your competition.

“Start with a clear vision and strategy,” Langner advises. “This vision should be shared by all stakeholders and should be used to guide decision-making throughout the merger process.” Do your own due diligence, get buy-in from stakeholders and develop contingency plans. “Eighty-five percent of mergers do not go according to plan,” Langner adds. “Make sure to stay agile.”

Be alert to potential synergies

There is usually an excitement that happens with mergers and acquisitions, and some of the synergies that come from them usually revolve around the new injection of financial, human and intellectual capital. Businesses should proactively have an ear to the ground for potential opportunities to merge with brands and companies that are good for overall business growth. Lord says mergers can be a positive phase for a business, and owners should be empowered to initiate conversations with larger brands to explore all possibilities.

Addressing the overall sentiment around the merger, Rabbitt notes that it has given the brand greater ability to meet diverse guest needs, from tours in different languages to theme-based offerings. “Consumers are looking for that deep level of experience, allowing our guests to see something different and truly be wowed,” he says. “It’s taking that feeling of not just ‘I did that,’ but, ‘I experienced that as no one else could.’”

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