Days are gone when the size of a company is making a big difference, with a high preference for big and established firms.
The rise of entrepreneurship and start-up culture has proven this, showing how better a small or start-up firm can compete with an existing or well-established market player.
Thanks to changing industry trends, innovation, expertise, frequency of release, and time to market have become critical considerations for gaining a competitive edge.
However, portfolio enhancement, market expansion, and financial performance are crucial to a firm’s success in this competitive scenario.
This could be a severe 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 M&A 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 fewer commissions for M&A Advisors. This is why small businesses usually choose regional partners, and M&A Advisors choose global-level high-paying deals.
However, 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 was very high compared to the last five years 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 by Forbes says that one-third of small business owners plan 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 a 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 critical points that small businesses should consider before going for an M&A deal:
1) It’s essential to check the company’s market standing regarding the 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 the target’s IP assets and related licenses.
3) It is also essential to check the partner’s alliances with foreign companies to ensure no discrepancies in accounting and finance matters.
4) Check if the advisory firm has expertise in the targeted region, market, product, and service lines related to the deal.
5) Check if the advisor can find you suitable matches and perform with due diligence.
6) Ensure the advisor can arrange the necessary finances and, if necessary, negotiate as part of the deal.
7) Check if the advisor is open to giving needed assistance in drafting strategic decisions as part of the deal and post-integration services.
8) The advisory firm’s fee structure is also important to consider, focusing on the monthly retainer fee, registration, and sign-up.
Be it to grow business turnover, increase market share, explore profitable opportunities, diversify investment beyond existing businesses, survive in the market, or undergo corporate restructuring, among other things, going for an M&A deal through Mergers and Acquisitions consulting is all about making a strategic business decision that is key to the organization’s future.
Make a wise decision! You may reach out to Veritis M&A Services for a successful deal!
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