Are Mergers and Acquisitions in your future? Part 1

April 30th, 2012

Be prepared for a challenge.

It’s hard to name many business transactions that are as risky and complex as mergers and acquisitions (M&A).  Over 85% of M&A deals fail, according to a recent study on M&A outcomes by KPMG. Fortunately, that number takes in all M & A tranactions, it is much lower for Staffing Industry M & A deals.

Another study, by A.T. Kearney, found that the total return to shareholders on 115 global M&A transactions was negative 58%. 

These astounding numbers are enough to make any organization think twice. It makes one wonder what criteria are being used that deem so many deals-failures and why acquirers keep coming back for more?

Still, when interviewed by the NY Times recently, Robert Kindler, global head of M&A at Morgan Stanley, responded that he is optimistic about the takeover market for the first time in years. 

He stated, “When you have historically low interest rates, less volatile equity markets and stock trading at low forward multiples which is when mergers and acquisitions are going to be active.” 

M&A activity tends to be driven by favorable market conditions, but that drive really begins with broader strategic objectives that are complementary among the parties in the M&A transaction. The objectives of the buyer and the seller come together in a way that propels the transaction to forward.

For example, one or both organizations may need the M&A in order to survive; or perhaps the move will enable a leaner, more profitable company; or it will better position the resulting company for necessary growth. Next Blog posting will cover Part 2.

Competitive Factors in Privately-Held Companies

April 26th, 2012

The following * factors may have a significant impact on the value of a privately-held company, but they are normally not applicable to the value of a publicly-held firm. Most of them are stand-alone factors that have to be taken into consideration by a prospective purchaser, especially a strategic one.

Most are not relevant if the subject company is acquired by a public company or a much larger company. However, when this is not the case, these factors will come into play.

They should be considered by buyers and, of course, sellers in considering or setting the price of a business.

  • Lack of access to capital
  • Ownership structure and stock transfer restrictions
  • Company’s market share and market structure of the industry
  • Depth and breadth of management
  • Heavy reliance on individuals
  • Marketing and advertising capacity
  • Breadth of products and services
  • Purchasing power and related economies of scale
  • Customer concentration
  • Vendor and supplier relations
  • Distribution capability
  • Depth, accuracy, and timelines of accounting information and internal control
  • Condition of facility and upcoming capital expenditure needs
  • Ability to keep pace with technological changes
  • Ability to protect intellectual property
  • Increasing threat of foreign competition
  • Litigation, environmental concerns, and adverse regulatory issues

When is the right time to sell your staffing firm?

April 12th, 2012

Selling one’s company at the right time is critical. It is difficult for the owner of a privately-held company to, as they say, “align the stars with the moon” to achieve the perfect time to sell. Public companies have their stock price to guide them.

Generally, most of us only know if the market turned after it happened, it is very difficult to time the market at its peak.

Here are some other ideas of what many would consider the right time:

  • Sell when the economy is robust.
  • Sell when your industry is hot.
  • Sell when your company is doing well.
  • Sell when the company is fully mature.
  • Sell after proper planning and preparation.
  • Sell when you find the right buyer.

While all of these factors will rarely line up in one’s favor, consider selling when most are in place. The universe is rarely in perfect harmony, but you can certainly choose a time when most factors are shining on your business.

There are certainly many other reasons. Others haven’t even been mentioned such as: health issues, personal problems, and the offer that’s too good to pass-up, etc.; the list is endless. Most people sell their business because something in their gut tells them it’s time. It is probably the same gut reaction that told them to buy the company or start the business in the first place.