THE FINANCE GHOST: Sorbet may be a sweet deal for Clicks

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This is a classic ‘bolt-on’ acquisition that, for a pricey company that some call ex-growth, could be a really smart strategic shift, writes FinanceGhost.

The word “platform” gets thrown around a lot these days. There are applications beyond the world of technology, though in its purest form I still think of a platform as being something like Apple’s iOS or Microsoft’s Office ecosystem.

When you have an empty space in your house, there’s an opportunity to fill it with something. If it’s an entirely new room, then this might be an acquisition in a new market. Once you’ve filled it with a display cabinet or shelving, you’ve executed the equivalent of a corporate acquisition. As you decorate around that piece of furniture, you’re “adding bolt-ons” to your “platform” that you’ve proudly created.

After all, which is harder — choosing the display cabinet for the wall or a pot plant to go on it? Exactly. Part of the challenge is the pressure to keep growing. If growth stops, a listed company will be valued like an inflation-linked bond at best. In other words, investors will value it based on a high dividend yield, which inevitably means a modest share price. Corporate executives don’t get paid to sit on their hands and watch a share price fall over.

 

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