The Strategic Pitfall of Acquiring Competitors First, According to Nick Bradley

In a recent LinkedIn post, Nick Bradley discusses a common but often misguided acquisition strategy: buying a competitor as the first move in a growth plan. Bradley, drawing on his experience in deal committees, argues that while seemingly intuitive, this approach can lead to significant complications if not executed in the correct sequence.

He highlights the immediate appeal of acquiring a competitor, noting the perceived advantages: “You know the market. You can see the synergies. You know exactly what you’d fix. It makes complete sense.” However, Bradley contrasts this with the practice of private equity firms, stating, “PE firms almost always do it last.”

Challenging the Competitor Acquisition First Mentality

Bradley elaborates on why the order of acquisitions is paramount, suggesting it reveals the management team’s strategic thinking. “Because the order tells you everything about how that management team thinks,” he writes. The core of his argument is that a competitor acquisition, while adding revenue, simultaneously introduces a substantial amount of complexity.

The Hidden Costs of Early Competitor Acquisitions

According to Bradley, founders often underestimate the challenges that arise from integrating two distinct entities. He points out the inherent difficulties: “A competitor acquisition doesn’t just add revenue. It adds complexity. Two cultures. Two customer bases. Two leadership teams. Two ways of doing the same thing — all at once.” This integration, he warns, can destabilize a company rather than facilitate growth if the foundational systems are not robust.

“If your platform isn’t hardened before you absorb that? You’re not scaling. You’re destabilising.”

Bradley advocates for a phased approach, emphasizing the importance of strengthening the core business before attempting to absorb a competitor. He suggests that the ideal first acquisition should bolster existing capabilities or address key risks rather than directly expanding market share through a rival.

Prioritizing Platform Strength Over Excitement

In Bradley’s view, the most effective initial acquisition is one that fortifies the company’s internal operations and infrastructure. He lists potential strategic targets: “A capability you don’t have. A talent pool that removes a key-person risk. A geography that proves your model travels beyond you.” The principle is to de-risk and systematize the business, proving its viability independently of the founder’s constant involvement.

“Build the platform first. De-risk it. Systematise it. Prove it works without you. Then buy the competitor.”

He reiterates that the timing of a competitor acquisition is critical. When done correctly, after the core business is solid, it can be a powerful catalyst for scaling. “Because in the right order – that acquisition becomes the move that takes a 7x business to 10x,” Bradley states. Conversely, he warns, the wrong order can transform a healthy business into a complicated liability.

“In the wrong order, it takes a clean business and makes it complicated.”

Ultimately, Bradley’s analysis, shared via his LinkedIn post, serves as a cautionary note for business leaders considering acquisitions. He concludes that while acquiring competitors is not inherently flawed, initiating this strategy too early is almost invariably a mistake. The emphasis remains on building a resilient, systematized core business as the prerequisite for successful expansion, particularly through competitive takeovers.