News and Insights on M&A for the Middle Market
Many companies struggle to execute successful deals because they lack a strong M&A strategy.
In a survey1 conducted by the National Center for the Middle Market, 38 percent of middle market companies said that developing the right strategy was their biggest challenge in M&A. That number may actually be higher because often companies react to opportunities that happen to come their way and rush into deals without first establishing a strategy.
Unfortunately, without a strong strategy, it is nearly impossible to execute a successful deal. A carefully laid out strategic plan provides critical focus so you can properly evaluate opportunities to identify the right acquisition that will help you achieve your goals.
If you are struggling to develop a robust acquisition strategy or do not have one at all, here are four tips for getting your acquisition strategy right.
1. Do some introspection
Thoroughly review your own company before you start looking at other businesses. Without a strong understanding of your strengths and weaknesses, how can you be expected to find a good partner? Even if you know everything there is to know about your company, we would recommend going through this exercise with your team. You might be surprised with your findings, and you will have alignment with your acquisition team as you begin developing the right acquisition strategy for your company.
2. Set aside the time
Make sure you dedicate enough time to foundational questions and do not rush off to acquire without developing a strategic plan. Moving swiftly is critical in the business world, but it is important to balance speed with thoroughness.
Before you begin looking at acquisition prospects, make sure you and your team have an understanding of why you are pursuing M&A and how an acquisition will help your company achieve its strategic goals.
3. Have ONE reason
Do not try to kill two birds with one stone. In acquisition, this approach leads to lack of focus and rarely pays off. When you follow multiple strategies, you end up following none of them. Write down your one reason for acquisition and refer to it often.
4. Follow a disciplined process
What good is a strategy if you do not follow it? Make sure you stick to your strategy as you pursue acquisition. Following a disciplined process and using objective, measurable criteria that is based on your strategic rationale will help you stay on track when evaluating markets and prospects.
Chasing after deals with no goal in mind is fruitless, as it can detract from your company's growth. Do not make the mistake of embarking on strategic acquisitions without first developing a comprehensive acquisition strategy.
Do you have questions about M&A? We would love to hear from you. Please contact us at 703-854-1910 or Growth@CapstoneStrategic.com.
1 National Center for the Middle Market. (Producer). July 26, 2017. The National Center for the Middle Market's Q2'17 Middle Market Indicator [Live Webinar]. Retrieved from acg.org/events/webinar-national-center-middle-markets-q2-17-middle-market-indicator.
Photo by Jérôme Choain. Public Domain. Retrieved from flickr.com/jcfrog/9204455981.
Nestlé buys a majority stake in Blue Bottle Coffee
The acquisition of the specialty coffee shop will help Nestlé increase coffee sales and profit margins in North America. The artisanal coffee market is growing quickly and accounts for 15 to 20 percent of coffee drunk in the US.
United Technologies to acquire Rockwell Collins for $30 billion
The consolidation will be one of the largest deals in the aerospace industry. The deal for the airplane parts maker will compliment United Technologies' existing capabilities and help the company compete against rivals.
Michael Kors snaps up Jimmy Choo for $1.2 billion
Michael Kors hopes to leverage Jimmy Choo's strong brand and growth to combat declining sales. “Affordable” luxury retailers have faced tough competition from ecommerce, which is changing how consumers shop.
Don't Negotiate for a Win-Win
Many think achieving a win-win situation is a positive outcome during negotiations, but I would like to challenge this assumption. Although it is necessary for both sides to agree to move a deal forward, a “win-win” implies you are also negotiating for the other side when your primary concern should be ensuring your own success.
Rather than focusing on the other party, it is best to have a clear understanding of what a win looks like for your company. Solidifying this prior to negotiations will help you more effectively achieve your desired outcome.
A negotiation does not always have a winner and a loser and both buyer and seller may be happy after the deal closes, but you should be advocating for your own company – not the other side. Let the other party figure out what a win means for them.
The latest events from M&A U™
Contemporary Legal Issues in M&A — Stay up-to-date on the latest legal requirements.
1 PM EDT – Oct 19, 2017
CPE credit is available.
M&A: From LOI to Close — After receiving a signed letter of intent, make sure you safely guide the deal to a close.
1 PM EST – Nov 16, 2017
CPE credit is available.
7 Strategic Questions to Ask Before Pursuing M&A — Thinking about growing your business? Learn 7 powerful questions that have been tried and tested with dozens of companies.
1 PM EST – Dec 14, 2017
CPE credit is available.
|Previous (Summer 2017)||Bulletin archive||Subscribe (Winter 2018)|