The Mergers & Acquisitions (M & A) marketplace is continuing its presence as US businesses continue to reshape themselves to better compete in today’s challenging market.
Today, business owners are confronted with the costs associated by means of advancing technology, increased foreign and domestic competition, and higher customer demands for quality and value to name a few. These challenges leave a business owner with a few options that characteristically include major capital infusion, selling, or the consideration of a Merger & Acquisition.
M & A oftentimes gives buyers the way to build their competitive position. Due to its nature, most M & A transactions typically occur in the middle and lower-middle market. On the sell side, lower-middle market business owners are seeking to escape the rigors of running a company today. On the buy side, corporations view mid sized companies as an opportunity to gain important synergies without “betting the company” on any one acquisition. The lower-middle market offers efficient opportunities for growth, while minimizing the risk of entering new markets as well as the expense associated with start ups. Consequently, corporate buyers, CEO’s and board members continue to view M & A’s as an essential expansion technique.
Corporate buyers are particularly motivated by strategic acquisitions of close-fitting, synergistic companies. These deals are designed to increase market share by complementing their areas of concentration, fill voids in the acquiring company’s product line, reduce the actual cost of goods, market share, geographical expansion, control distribution channels, or capitalize on the benefits of shared technologies or vertical integration.
The factors that drive the increase in business sales today are: a global marketplace, advancing technology, and consolidating industries. In addition, buyers are generally optimistic about the economy regardless of consumer confidence, foreign buyers are playing an ever increasing role, and financing availability and conditions remain favorable.
To these factors we add the fact that foreign buyers continue to influx the US as they are attracted by both a need for global presence and a more stable economy.
Lastly, as a result of corporate cutbacks of the ranks of middle and upper managers, the pool of quality owners/operators looking to acquire a business has expanded. Often, upper management is relieved with handsome exit packages that allows them the opportunity to integrate into a growing company, bringing forth the necessary expertise as well as a personal investment.