To badly misquote Mark Twain, “reports of the death of M&A are greatly exaggerated.”
The reality is that interspersed with gloom that relates to the economy, particularly with higher inflation, political tensions and tightening of fiscal policy, good quality businesses are still being sought after.
For example, in my personal specialisation of Food & Beverage, businesses in growing niche such as boutique brewers and wineries, plant-based foods, healthy snacks and quality pet food, are still getting high levels of interest from strategic acquirers. The same applies across the landscape.
But the reality remains the same. Whether it be with organic growth or growth through acquisition, businesses still need to appease their public or private shareholders by creating value, particularly where there is sufficient cash on the balance sheet to afford such growth.
Increasing risk aversion means that this growth is more likely to come from acquiring businesses with a proven track record and opportunities through niching or scaling, rather than taking risks on pre-revenue technologies or risky “visions.”
The important change is that acquirers are taking longer to evaluate potential acquisitions and taking longer signing off on due diligence. For the seller, this necessitates greater pre-sale preparation. In our “fit for sale” service, prior to the commencement of a sale process, we work with our sellers to:
- Shortlist potential acquirers and have visibility of their radar, perhaps through partnerships or strategic alliances.
- Ensure that pre-sale guidance is considered upfront particularly regarding structuring and post-tax exit pay outs.
- Expending greater effort on gathering company intelligence on potential acquirer market moves.
- Ensuring that inhouse systems and recordkeeping is optimised to ensure there are no roadblocks at the due diligence stage.
- Developing action plans to create value in the areas of the business most likely to be of interest to the acquirer.
Ultimately, even if the market continues to tighten, our clients remain in good stead when we approach acquirers most cashed-up to pay a fair price for their scalable and growth-oriented businesses.
