Days are gone where the size of a company was making a big difference, with high preference for big and established firms.
The rise of entrepreneurship and start-up culture have proven this, showing how better a small or start-up firm can compete with an existing or a well-established market player.
Thanks to the changing industry trends that made innovation, expertise, frequency of release and time to market as the key considerations for gaining a competitive edge.
However, factors such as portfolio enhancement, market expansion and financial performance continue to play a crucial role in deciding a firm’s success in this competitive scenario.
And, this could naturally be a serious challenge for small firms looking for faster progress and significant market share.
Are you a small business player struck somewhere here?
Don’t worry! A perfect Merger & Acquisition Strategy can help you!
M&A for Small Businesses: A Glance at Market Trend
In general, small businesses and M&A deals often stay away majorly due to the value involved.
Dealing with a small business generally involves low costs, which result in less commissions for M&A Advisors. This is the reason small businesses usually go for regional partners and M&A Advisors go for global-level high-paying deals.
But the market trends show the other side of the M&A and small business combination!
According to the International Brokers Association (IBBA), advisors have reportedly seen the best-ever M&A market in recent years, with even small business owners stepping forward to take advantage of the situation!
Citing their Q2 2018 Market Pulse Report, IBBA and other survey partners concluded that ‘seller sentiment’ in small business sales during the quarter has been very high compared to the last 5-year period of the quarterly report.
“I have talked to several M&A advisors, and we are seeing many active buyers working on multiple deals at once, which has not been the case in past years – or, at least, not at the volumes we are seeing today in the lower-middle market,” says Scott Bushkie, a fellow member at IBBA.
Another 2018 report, published on Forbes, says that one-third of small business owners are planning to sell their businesses in the next two years, irrespective of their relationship with the firm, and 84 percent of businesses plan to buy in 2019.
Citing this scenario, Bushkie says small businesses shouldn’t be hurried at the trend and should instead be prepared with all the prerequisites that an effective deal demands, particularly the internal records about company’s operations and financials.
“It is always better to identify ‘warts’ in business early, versus later. No one likes surprises, and later in the deal usually will cost the seller significantly,” Bushkie adds.
Here are some key points that small businesses should consider before going for an M&A deal:
1) It’s important to check the company’s market standing, in terms of existence, certification and related documentation.
2) Intellectual Property (IP) matters such as copyrights, trademarks and patents are another key consideration in an M&A deal, where the buyer checks target’s IP assets and related licenses.
3) It is also important to check the partner’s alliances, with any of the foreign company, to ensure there are no discrepancies in accounting and finance matters.
4) Check if the advisory firm holds expertise in the targeted region, market, product and service lines pertaining to the deal.
5) Check if the advisor is able to find you suitable matches and performing with due diligence.
6) Ensure the advisor holds enough capability to arrange necessary finances and negotiations, if required part of the deal.
7) Check if the advisor is open to give needed assistance in drafting strategic decisions part of the deal and post-integration services.
8) Fee structure of the advisory firm is also important to consider with focus on monthly retainer fee, registration and sign-up.
Be it for growing business turnover, increase market share, explore profitable opportunities, diversifying investment beyond existing businesses, survival in the market, corporate restructuring, among others….Going for an M&A deal is all about making a strategic business decision that stands key to the organization’s future.
Take a wise decision! You may reach out to Veritis M&A Services for a successful deal!
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