As a strategy consultant, I have borne witness to an all-too-familiar tendency for slow-growth companies to try and buy their way into prosperity. History is riddled with failed acquisitions by companies who have lacked a cohesive growth strategy.

Many buyers believe that if they tack on volume, they will create enterprise value through financial engineering–buying companies at lower multiples, only to sell theirs at a premium. And while this form of arbitrage is the basis for much of today’s merger and acquisition (M&A) activity, it is also rife with risk. The grass is not always greener on the other side.

A successful growth story puts a company on a footing to deliver unique value in markets that are clearly defined. Fundamentally, there are three ways to build a business: within a core competency, in new products or markets, or by transforming an industry.

Studies have revealed that large companies realize the greatest return in the short term when they invest in their core. However, they realize the greatest return on investment in the long term by focusing on initiatives that are more transformative.

A thoughtful buyer looks to incorporate all three approaches in a long-range strategy that builds scale while transforming the company’s value proposition:

Strategy #1: Bolt on to your core.

Historically, the vast majority of acquisitions are completed by companies buying like companies (in the case of strategic acquisitions) or financial buyers who buy within segments they know. That’s because buyers want to reduce risk by sticking to their core competency.

This is the private equity playbook. Private equity firms tend to buy interests in companies that are low margin (less than 10 percent EBITDA), and attempt to improve profitability. They then optimize the business and build volume, sometimes through synergies with other portfolio companies they own.

Other investors will look for other complements to their core business, such as better managing of scale and capacity. Some companies want to add to their capacity, and others want to take capacity out of the industry (reducing supply).

Large companies often try to build economies of scale by taking costs out of the system, a formula that is becoming less successful as companies squeeze all the juice out of the orange.

Strategy #2: Provide access to new products, markets and channels.

Buying into new markets or channels is a popular strategy, especially for companies trying to ramp up quickly.

This is particularly effective in cases where a provider has deep penetration in a particular niche, and also the companies that sell at higher multiples. Companies are worth more when they have unique products, or those that are graded by some barriers to entry and/or intellectual property, such as patents.

More often, buyers are trying to access a market or buy customers. However, private equity firms assume that they will lose upward of 30 percent of an acquisition’s target customers, and buyers should make similar assumptions.

For buyers seeking an adjacent market, it’s important to check a number of boxes. Be curious. Does the acquisition candidate have branding power in the market? If the product is physical, could you be disintermediated? How much consolidation is likely to take place in the customer base? Can you up-level products and charge more? Does the acquisition represent a repeatable formula that can be applied to other sectors?

In other words, make sure you have a strong business plan that rationalizes the sector you are trying to be in before considering an acquisition that moves you into that market. Be specific about what sub-segments within a market you want to dominate.

Among the largest deals in 2019 was Salesforce announcing it would buy Tableau, thus diversifying its offer.

Strategy #3: Buy unique technology or capabilities.

Disruptive technologies are often cheaper to acquire than they are to build. Companies can save years of development by buying a poorly-funded technology provider. Startups often lack the capital to scale a product, do not have mature sales and marketing infrastructure, and are cash poor.

I once led a strategy session that merged a venerable insurance company (in business for over 100 years) and a technology startup. You could have sold tickets, as the thirty-somethings taught the sixty-somethings how the business would run. In the end, they built a radically new platform that disrupted the insurance industry.

Such combinations will be far more prevalent. Most of last year’s largest deals in were those that vertically integrated companies. Non-technology companies buying technology companies is a mega-trend. For example, companies such as General Motors are attempting to buy their way into autonomous technologies.

Look for companies who are not fully formed but have feature sets that could improve your technology. However, a word to the wise: integrating a company with an entirely different competency poses challenges as your software, processes and management team may not be tooled to manage a transformative business. It is often best to let them run as autonomous units.

So, be thoughtful about your acquisition strategy in a way that you build accretive value to the entire enterprise.