On January 5, 2015, Fortune released an article which highlighted that, “global merger and acquisition activity hit $3.5 trillion in 2014, which is up 47% from the year before.” Using Thomas Reuters as a resource, this article is a number of recent publications showing that M&A activity has steadily increased over the past 5 years, with 2014 seeing significant increases. More and more companies have utilized M&A as a strategy for achieving business growth and goals.

Historically, M&A has been largely seen as big fish eating little fish. While it is true that Fortune 100 and 500 companies are more active in the M&A realm, middle market M&A has seen a stark increase over the past 5 years as well. As expressed in an August Middle Market M&A update from Deloitte, “on a year-over-year basis, Q2 2014 showed strong growth with respective increases of 35.5% and 11.2% in deal value and volume (per Thomson Reuters).”

So as a business owner, do you know how or why you should consider utilizing M&A as a tool for growth and expansion?

There’s a reason why the big boys have made M&A a integral part of their business strategy.

My previous article highlighted the “Top 5 Sell-Side Advantages of M&A”. This article highlights the advantages from the buy-side.

Established Operations

It’s no secret that one of the hardest parts of starting a business… is starting a business. Generating efficient processes and procedures takes time, money, and more money. It’s a generally accepted statistic that between 75% and 85% of all startups fail within the first four years.

Those statistics tell one story, that it is extremely risky to start a company or bring a new product to market. By purchasing an operation that is establish and has already proven itself, you reduce your company’s risk exposure and increase the likelihood that you will survive in the industry of the acquired business.

Established Expertise

Along with the established operations, you get established expertise. If the deal is structured correctly, when you purchase an existing company you get all of the human capital that previously existed with that business. Purchasing the right business means that you get not only industry experts but experts of the operations as they existed pre-acquisition

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Offering Diversification

That established expertise serves as a tremendous asset, especially when you’re looking to diversify your product offerings. How many of you remember the Google Nexus One android phone? Not many. How many of you purchased the Google Nexus One android phone. Even fewer.

For those who are unfamiliar, the Google Nexus One was Google’s failed attempt to enter into the mobile phone market in 2010. Google lacked the necessary human capital needed to produce and market a viable mobile phone option. So what did Google do? They turned around a year later and acquired Motorola Mobility for $12.5b.

That purchase is just one of many examples of companies who have had failed attempts at expanding beyond their traditional scope of offerings.

With the purchase of Motorola Mobility, Google was able to easily diversify because it acquired the human capital (expertise) necessary to develop a competitive product.

Effectively achieving diversification through M&A can lead to economies of scale that will actually reduce the cost of operations [per unit] and allow the company to realize greater profit margins.

Vertical Integration

Google’s purchase of Motorola Mobility was an example of something else, vertical integration. Google wanted to purchase Motorola Mobility, in part, because it wanted to seamlessly integrate its software onto a hardware that it could call its own, rather than just integrating their software on the hardware produced by a third party.

Vertical integration, if done right, has the capability of producing economies of scope. For example, if you are British Petroleum and you are currently just distributing gas while purchasing oil from a third party, you are no doubt paying more for that oil than if you owned the drills and pipelines that produced the oil.

As a business owner, owning more parts of the process used to take your product to market can decrease your incremental costs and increase your long-term profitability.

Increase Market Share

Market share is the lifeblood of a company’s existence. Many companies reach a point where they plateau and become stagnant. Other companies are steadily growing but look to make a significant jump in the amount of market share they own. In either case, M&A can be used to achieve this increase in market share.

When you purchase an existing company you purchase their customer base. This concept has been a compelling factor and driving force in the M&A world. A focus on market share has led many companies to use M&A as a strategic growth tool.