Using Mergers & Acquisitions for Business Growth
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.