Why a Management Team Should Always Be Talking About M&A
As an M&A professional, I am often met with the stigma from others that I can only be useful to a business owner when they are looking to sell a business; that a relationship with me is come-and-go as needed, call me when the time is right.
I would like to make the case that engaging with, and regularly speaking with, people like myself on a regular basis can create more value than waiting until it comes time to transact.
I read once that one of the greatest public affirmations a company can make is when they engage in an M&A transaction. Why? Because it is a declaration to the world that a company is doubling down on something, that it is adding something that it cannot do itself, the urgency of the situation was worth the risk of price, integration, execution, or scope to go-it-alone or greenfield a new project. It can also mean that the company needs to pivot completely from their existing strategy. An example of the high profile transactions like this recently is Microsoft and ChatGPT: competitors were instantly on their back foot, and Microsoft had access to a completely new market.
Sometimes an acquisition is a natural fit because of industry; it can be a vertical integration or consolidation; expanding to an adjacent geography; combining similar product portfolios; creating synergies or value due to newfound scale and relationships with suppliers or vendors.
Whatever the reason for making this very public decision, the M&A market is an ever-changing landscape that provides insights for business owners, whether you are considering a near term transaction or not, into what your competitors are doing to create value for their business.
Including strategic discussions about the relevant M&A markets as a regular part of business strategy allows management teams to address long-term prospects or problems. M&A provides real-time insight into the strategic decisions and the direction companies in your industry or geographic region are facing. It can provide discussion topics about customer or vendor needs; product and service categories; competitive barriers and cost saving metrics. It can also provide the important “devils advocate” as you compare your own strategic initiatives.
So what does this have to do with a business owner’s relationship with an M&A professional?
As a trusted advisor, it is our responsibility to know the current state of the M&A landscape, so at the very basic level we are aware of trends and valuations, but there is so much more to it.
As we work with businesses either looking to acquire or be acquired, we talk not only with our own clients, but with many different buyers, investors, or companies looking to assess how an acquisition would fit that very strategic vision I mentioned earlier.
Our hands-on experience gives up to the minute insight into the broader strategic considerations of anybody looking into the industry or company. Beyond just answering, “why did Microsoft buy such a large stake in ChatGPT?” we can address the very nuanced operational and strategic considerations that go behind such a big decision.
Our work with middle-market companies almost always gets into the weeds on expansion capabilities, operational structures, supply chain optimization, sales team strategies, and so much more. And that is before we even approach a potential investor or buyer in the marketplace, each with their own strategic vision and concerns. Of course, we can never speak specifically about something shared with us in confidence, but the industry portrait that an M&A advisor has access to on a daily basis far exceeds the generic and high-level industry trend information a consultant or research report can offer.
I would encourage everybody to have a conversation with an M&A professional on a regular basis, especially if they see a deal announced in their industry. You can ask questions that even on the surface give insight into the broader landscape required to make sound business decisions and address the needs of all stakeholders of your business. Any M&A advisor would be happy to hear from you and none of the good ones will charge you anything until you actually engage them.
