$2 billion Hostess Brands filed for bankruptcy and liquidation. Twinkies were never a staple in my diet, so I won’t notice when they no longer show up on shelves, but there could be opportunity for someone to snatch up the assets Hostess leaves behind. The question for entrepreneurs: when does it make sense to use an acquisition strategy versus inventing or creating from scratch?
Look at entrepreneurial phenom Hamdi Ulukaya, Founder and CEO of Chobani yogurt. He stumbled on a classified ad for a yogurt plant shut down by Kraft and decided to buy that same day. From a single spark of an idea, one of America’s most popular yogurts was born.
Like Ulukaya, many entrepreneurs have had success using an acquisition strategy to either get started or expand. Here are three ways champion company founders buy up existing brands and businesses.
1. Buy for a Better Brand. When Gian Fulgoni, founder of ComScore, acquired Media Metrix, it was the best known brand in the audience measurement industry. Gian had better technology under the hood, but Media Metrix was the flashier brand on the outside. So he acquired and scaled up customers much faster than on ComScore’s brand alone.
2. Buy For Speed to Market. Glen Tullman, CEO of Allscripts, makes no apologies for deriving 40% of his revenue from acquisitions. When I interviewed Glen as part of the recent Entrepreneurial Bash founders panel, Glen told me that because health care technology is a rapidly changing space, acquisitions were vital to staying competitive and ahead of the curve.
3. Buy for New Markets and Technologies. Joe Mansueto, founder, chairman and CEO of Morningstar, is well known for growing his financial products company from scratch to $600 million+ revenue and thousands of employees. But it wasn’t all organic. Along the way Joe quietly made more than a dozen strategic acquisitions, including Ibbotson and Realpoint, which increased Morningstar’s firepower overnight.
Putting Twinkies, Ding Dongs and Ho Hos aside, what about your industry? What’s the adjacent product, company, or technology that could fit into an acquisition strategy to help you grow faster? Are you sure you have to launch from scratch?
**Robert Jordan is a Forbes.com contributor. View the original posting of this article on Forbes.com.