Time to Merge or Acquire?

The Wall Street Journal’s Sarah Needleman recently reported that during the second quarter of 2011, sales of small businesses were up and, significantly, that it’s a buyer’s market right now.  While that may not be good news for small businesses that would rather not sell at a low price,  for many other companies this may be a good time  to acquire or merge with an enterprise that can  expand growth,  create synergies,  improve  competitiveness,  and increase  longer-term valuation.

It’s not just large companies that engage in M&A.  In our Q2 Vistage CEO Confidence Index, we learned that 17% of Vistage members are interested in selling their businesses or attracting new investors, while 36% said they are open to acquiring or merging with other firms.  Today, some companies have excess cash to use for acquisitions and, indeed, sellers are often willing to offer financing as well.

A difficult economy can present substantial opportunities to strengthen a business through M&A.  I expect M&A transactions in the SME sector to remain quite vibrant through the remainder of this year. Companies considering such transactions should consult qualified investment bankers or business brokers to help them run an effective process and achieve a fair valuation. And they should be aware that the real challenges come after the closing of the transaction, when they not only have to consolidate people, systems and operations, but also blend cultures which is often the hardest challenge of all.

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