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Using Mergers & Acquisitions for Business Growth

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Using Mergers & Acquisitions for Business Growth

By , December 11, 2019
mergers and acquisitions - Succession Plus

According to a new report from the National Center for the Middle Market – “mergers and acquisitions (M&A) are critical to the growth of many middle-market companies.” Unfortunately, most business owners and their senior executives do not have experience in M&A and many are surprised by the challenges faced during the process. “Careful preparation will minimise risk, avoid obstacles, be better equipped to surmount others, and improve the overall success of M&A transactions.”

A few statistics to consider:

  • 60% of middle-market companies that participate in M&A say it is VITAL to their growth strategy.
  • 26% is the growth rate they attribute to M&A.
  • 20% of mid-market companies complete an acquisition annually.
  • 90% of companies that sold or merged in the past 3 years had “little or no” previous M&A experience.
  • 41% of buyers and 43% of sellers found it very difficult to assess the value of the business they are buying or selling – link/promote valuation tool.
  • 44% said that integration (both technical/operational and cultural) is a major challenge.

A few key areas stand out for those with successfully completed deals – the report concluded that “deal ready” should include:

  • Governance – clarity around decision rights and operating authority – refer to Step 12 in our 21 Step process 
  • Working Capital – improve financial management – Step  9
  • Talent – retention strategy and incentive planning – Step 13 & 14
  • Technology – up to date systems and cybersecurity – Step 10
  • Planning – Strategy, business plans and KPI’s – Step 8
  • Operations – documented and trained processes and improvement plans – Step 10

They also included Advisers and industry networks and connections as critical success factors.

Visit the National Center for the Middle Market website to view the full report.

For more insights into how to achieve business success in the middle-market, listen to our Mid Market Matters podcast. 

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.