Smart Money Moves in M&A
Alex Miller talks smart money and mergers and acquisition in this article designed to help buyers take the plunge when opportunity knocks.
Corporate buyers face unprecedented competition from private equity funds, as well as with traditional and non-traditional competition for the most attractive acquisitions. Horizontal integration has largely played out in most traditional sectors, and the U.S. Department of Justice is carefully watching consolidation in many industries. Corporations are also experiencing intensified threats from disruption and innovation, and competitive cycles are being compressed dramatically.
With this as the backdrop, more and more CEOs are identifying inorganic growth as a key lever in future strategies, according to recent research by KPMG. Despite concerns surrounding corporate growth, oil prices, and international economic instability, our additional research indicates that both corporate and private equity players will continue to turn to transaction opportunities for growth in 2016.
Buyers are facing less pressure to “stick to their knitting” and are considering acquisitions that provide access to new products, markets, talent and technology. Extending reach via M&A requires careful selection of an acquisition target – and buyers must transform from “strategic” to “smart money.”
Becoming a smart money buyer means that you have established a validated investment thesis and a value-creation plan for an investment. Having a smart money framework also requires a buyer to establish an advantageous position regarding market and/or target insight, which is not always easily achieved. Consider the following themes to prove your smart money M&A thesis and craft your value-realization plan.
Remain disciplined but creative when pursuing targets. Markets change daily. Customer behaviors and preferences are evolving, while traditional and new competitors are innovating and seeking to erode established market positions. Your success has made you a target. Leading acquirers are becoming more innovative in their approaches to sourcing, evaluating and building value in target acquisitions. They are disciplined, thorough and active in evaluating targets. They go beyond what is for sale and target the assets that they want.
Key points include:
- Diligence as a weapon
- Establish privileged knowledge
- The strategic fit of a target organization
Read the full article, For the best buyer in M&A, smart money is no object, on LinkedIn.