Questions to Ask About Acquisition-Based Manufacturing Growth
Acquisitions have always been a viable strategy for manufacturing and supply chain companies to grow. In Q1 of 2021 alone, there were $36 billion dollars in deal value, compared to $17 billion in the same quarter the prior year. M&A investments are again happening, but it doesn’t mean that they’re right for everyone, nor that any specific M&A undertaking is right for your company. These four questions can help.
What is your company all about?
This is surprisingly difficult for many enterprises to answer. Before you can move forward with a deal, though, you need to know what your company’s core competencies are, what you bring to the table. Consider your corporate culture. What sets it apart and makes it unique? What might make it better? What sorts of companies would yours blend best with?
What are your goals?
Growth is not a goal unto itself. There must be a specific reason you hope to grow, and a specific direction you want the growth to go. In many cases, businesses have a number of small reasons for engaging in M&A. This can nurture indecision and uncertainty. It’s typically better to have one or two clear, compelling reasons that justify the merger. Most acquisitions cannot address multiple needs. Forcing them to try to do so is a recipe for rapid failure.
Do you have the right team?
A merger should never be a DIY undertaking. You need to identify what you don’t know, then hire experts to fill in those knowledge gaps. An acquisition should be a collaborative, team undertaking that relies heavily on the wisdom of lawyers, investment bankers, accountants, and other industry experts. Build a strong team and the other side will be less likely to take advantage of you during the negotiation process.
How do you intend to contact companies on the market?
The way you approach a potential acquisition target can color their opinion of you. Moreover, not every company available for sale is listed on the market. Some may list with brokers, but others are discreet. Still others may be willing to sell if approached with a great offer. Be prepared to undertake a structured process to search for available businesses. Working with a good broker is key here.
There’s no one size fits all strategy for assessing every potential M&A target or buyer. It’s part art, part science, and requires quite a bit of wisdom to get right. This is why it’s so critical to work with a skilled, experienced deal team who has experience in your specific niche.
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