Many business owners call us because their companies have reached a size that complicates the management and they are not prepared for the next stage. As consequence, they feel ready to use an M&A strategy.
His business is not small and flexible anymore, nor is it big enough. It is stuck in the middle.
Business owners reasons for using M&A strategy
Business owners prefers to sell the company to a larger organization with bigger resources, rather than continuing with the current difficult path. This is frequently followed by the need to internationalize the company or relocate in order to stay competitive. Business owners see how the relevant competitors are outsourcing manufacturing to other countries, which is a process that they don’t how to approach.
We had a client that was conscious of the fact that his company needed to become international. He could not speak other languages which prevented him from tackling this international project with the expected level of leadership. However, his management team pressured him and tried to convince him to go on with the international expansion. Frightened by the potential risk of the undertaking, he decided to look for private equity which could work with his management to handle the challenge. As sell side advisors, we located four private equity entities that bid on the company (two domestic and two international). We finally closed the deal with a foreign investor that incentivized the managers to undertake a powerful international expansion.
Sometimes the signal comes from human resources. Difficulties hiring or retaining a capable management team are at times a sign that the moment to sell has come.
In other occasions, the loss of important clients is a sign that the business is losing its competitive advantage and the company needs to make a strategic change.
Economies of scale that other companies reach through sector consolidations can make business owners realize their size isn’t enough to survive this change.
What do you need to do?
You need to ask yourself: Is there enough business for all the competitors? Are there companies disappearing? Is there a consolidation on the sector?
The growing interdependence of economies across the planet has accelerated cross-border M&A deals, forcing local companies to search sufficient critical mass to compete against global players, this commonly translates into mergers.
If you realize that you can’t play in the global arena by yourself, is better to sell or merger with another player before it is too late. Don’t hesitate to contact us to talk about your company’s future and how M&A strategy can help you!