Middle-market professionals bullish on M&A activity

The coronavirus outbreak put M&A activity on pause resulting in many large deals not closing.
Recently Mergers & Acquisitions Magazine interviewed middle-market professionals to get their take on the current M&A environment. Fortunately, the current situation is not leading investors to make material changes in their medium- or long-term investment programs or strategies for the following reasons:

1. The large amount of dry powder that needs to be deployed (e.g., investor cash reserves)

2. Record high valuations will likely decrease

3. Continued low-interest-rate environment and access to financing

4. Continued digital transformation and technological disruption

Because of COVID-19, many businesses are “hunkered down” and operating in survival mode. Rather than survive, what can you do to thrive in the new normal?

Now may be the best time to consider an acquisition to grow your company. Acquisitions can reinforce or expand your competitive advantage. Acquiring another business may speed up your company’s growth when compared to building internal capabilities via organic growth.

Successful acquisitions can:

• Improve your company’s performance
• Accelerate market access for your products
• Get skills or technologies faster or at a lower cost than you can build them
• Leverage your business model by acquiring a company that has the potential for growth and increased profitability but has not yet fully developed

Where do you start?

Begin with an acquisition target profile or checklist for identifying target companies based on your goals.

• What is the purpose of the acquisition?
• What are your investment criteria?
• What are the attributes needed to achieve your goals?

Below is a list of attributes to consider:

• Industry
• Type of company
• Geographic location
• Market strategy
• Competitors
• Operational efficiency
• Sales, profit margin, and cost structure
• Intellectual property (e.g., management, trademarks, patents or proprietary technology, etc.)

 

Test your investment criteria and determine how many targets exist in the market. Begin by researching the population of companies that meet your target profile, and then begin to narrow the list to the top companies.

Do one thing: Determine what can you do to thrive in the new normal. Could an acquisition enable you to speed up your company’s growth and increase your competitive advantage?

Click here to see the full article, Mergers & Acquisitions Magazine, Viral impact: How the coronavirus is affecting M&A and private equity.

Thanks for reading.