Insights & Info

Insights > How to Succeed with Your M&A Strategy

How to Succeed with Your M&A Strategy

By Generational Equity

M&A Strategy

Recently, the National Center for the Middle Market conducted a survey on factors currently driving middle market M&A activity. They surveyed 400 strategic decision makers from middle market companies that either “completed an acquisition or sale in the past three years” or “are highly likely to sell a company or part of a company in the next three years.”

Their goal with the survey was clear:

The Center designed the survey to understand attitudes and perceptions related to M&A, evaluate the importance of acquisitions and sales to middle market companies, identify drivers of M&A activity in the middle market, and gain insight into the obstacles and challenges involved in deal-making pre-, during, and post-transaction.

As with all their research, the analysis of the respondents provides clear insights into factors driving middle market M&A activity today, factors that could influence an M&A strategy for your business.

What is an M&A strategy?

It is a plan outlining your corporate development efforts, utilizing mergers and acquisitions to benefit you and your business. This could be securing investment for company growth, or exiting the business for the optimal value. Outcomes might differ, but an exit strategy should exist nonetheless.

As most of our readers are owners of middle market companies, I thought I would share some of the key points from NCMM’s survey here with you:

  1. When middle market executives initiate acquisitions, the buys are mostly based on a strategic rationale: Buyers are looking to drive growth by acquiring market share, capabilities, technology, and/or talent.
  2. A majority of middle market executives who participate in M&A – 60% – say that inorganic growth plays an important role in company growth strategy. The desire to drive growth is the number one reason companies consider M&A.
  3. The availability of more money to go after a relatively constant number of targets is driving valuations up. So, while actual deal counts have increased only slightly, there are more players in the game along with a heightened sense of urgency around deals.
  4. With many deals, progress can be slow and difficult to measure due to unexpected issues. Most deals take three to twelve months to complete. The planning horizon to become deal-ready ideally should be three to five times as long as the deal-making process itself.
  5. Developing or getting help with capabilities in planning, financial reporting, valuation, and execution well in advance of having a specific target in mind ensures that companies are ready to move when the time comes.

Of all their findings, I think the last two paragraphs are probably the most important to consider, especially if you own a middle market business today. If you haven’t thought about your M&A strategy at this point, it’s time to think again.

This cannot be stressed enough: You need to get started today if you want to exit in the next 9-14 months, and tomorrow if you are looking at an exit 2-3 years from now or farther. In reality, you should have a relationship started with an M&A advisory firm as early as possible in order to maximize your results.

How can they help with my M&A Strategy?

Because quite frankly few privately held businesses are “buyer ready” the instant the owner(s) decides to sell. This is one of the most important services we offer our clients; we help them to see their companies as buyers will in a detailed M&A strategy.

In fact, our due diligence checklist, which is part of our Roadmap for Enhancing Value, is probably one of the most important documents we prepare for each client. It allows the business owner to determine the steps he or she needs to take in order to optimize their valuations in the marketplace.

Few that are selling a business realize the importance of this until they are deep into due diligence with a buyer who begins to raise concerns about common issues, such as:

  • Excessive owner dependence
  • High customer concentration
  • Poor accounting systems
  • Lack of documentation
  • No middle management

These are just some of the roadblocks that an effective M&A strategy will help you navigate on the path to a successful exit from your company.

What often happens when these issues come to light? Two things typically. First, the valuation of your business is often lowered and/or secondly, contingencies such as earn-outs are attached to the transaction.

In many cases, deals completely fall apart because sellers have not created buyer ready businesses and the risk becomes too great for a buyer to move forward.

Start an M&A Strategy today with Generational Equity

To ensure that this does not happen to you, be wise and hire an experienced M&A advisory firm like Generational Equity to guide you through the process. With ample time available to you prior to your exit, you can truly enhance the company’s salability.

If you are ready to start creating your M&A strategy, take the first step by attending an executive conference.  Our experienced M&A advisors provide a unique, in-depth insight into M&A activity and the keys to building a buyer ready business.

Want to learn more? Use the following links:

And special thanks to the National Center for the Middle Market for conducting this survey and for providing some great analysis of the results. If you would like to review the report yourself, use the following link: Middle Market M&A: What Executives and Advisors Need to Know to Make the Most of Mergers & Acquisitions.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2018 Generational Equity, LLC. All Rights Reserved.

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.

Success

Success, you have been added to our list.

Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!
Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers