Over the long haul, many companies fail to reinvent themselves and it ultimately leads to their downfall. Eventually, competitors will catch up or new technology will replace the status quo. Having the financial resources to invest in research and development is a stretch for most, so typically acquisitions provide the easiest option.
Before building the acquisition strategy, companies should first reflect on liquidity and capacity. With regards to liquidity, consider both cash on hand and bank lines of credit. Most targets can be levered as a multiple of EBITDA, so there is substantial scale to be gained with a willingness to take on debt, especially in today’s low rate environment. In terms of capacity, consider whether your company has the ability to absorb more work. Many deals can derive substantial value from cost synergies (e.g., no need for two CFO’s). Also, consider hiring outside advisors if your team lacks M&A expertise to price, negotiate and integrate a deal.
When building a core strategy, most companies consider three fundamental options:
- Grow organically
- Sell or Partner
Regarding acquisitions, typically they will fall into one of these categories:
Open minded companies should consider all purchase options in developing both short-term and long-term strategies. Consideration of all options, combined with substantial diligence, should better enable the long-term viability of the firm.
About Sun Acquisitions:
Sun Acquisitions is a Chicago based M&A firm specializing in helping businesses confidentially buy and sell privately held firms. Our team is comprised of certified business intermediaries with deep transactional knowledge and experience across a broad range of industries. Our Advisors have experience working on hundreds of due diligences for small and middle market transactions.
Let our team of Advisors and former Corporate Development Professionals help drive your business to the next level. Contact Sun Acquisitions for a free consultation at [email protected].