Should Foreign Buyers Acquire or Go Greenfield in the US?

ACQUIRE or GREENFIELD?

by Terry Stidham



The answer to this question can depend upon a combination of many factors. They won’t all necessarily point in the same direction, but it’s important to weigh each in your decision process.

Greenfield Investments are foreign direct investments where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Acquire or go Greenfield?

Acquire - In the case of an acquisition, 

• How similar is your product line to that of the target? 
• Are there issues with proprietary or sensitive technology?
• What place will the U.S. venture occupy in your global structure?
• What is the scope and difficulty of the integration task that you’d be taking on? 
• How relevant is the cultural gulf between the two groups you intend to knit into a team? 
• And at what pace should you move?

Generally, acquisitions can get you into the market much faster and help you pre-empt competitors. But the price tag can be hard to quantify because considerations such as stay agreements, management, recruiting and integration carry their own costs. An acquisition also depends on synergy capture.
 

Greenfield - With a Greenfield investment, it’s important to evaluate your own organization’s degree of experience doing business in the United States and the scale of the entry you’re attempting.

• Do you have the strengths in management and technical competence, or are you looking to bolster one of these areas? 
• And what type of Greenfield move are you considering: licensing, a joint venture, or starting a new entity from the ground up?

In contrast, Greenfield investments make it easier to stage or phase commitments which give investors more direct control over risk management. However, it takes longer to build something new than to add it to your organization with the stroke of a pen.

 

Questions behind the questions

• Are the customers, suppliers, and service providers you’ll work with in the United States ready for a “new face” in the market, or is their comfort with an existing entity an asset?
• Is it more important for your U.S. operation to prosper on its own terms as a market presence or for it to serve the larger needs of the global organization?

Get Started

If you’re considering this choice, you probably aren’t operating in a vacuum. Compare the top handful of acquisition targets on your list with the top handful of Greenfield opportunities. Which ones offer:

• The more timely assimilation into your target market?
• The easier route to capital repatriation?
• The preferred security for your processes and knowledge?
• The more favorable tax advantages?

 

About the author: Terry Stidham, Managing Partner of Target Search Group (TSG). TSG is a business development firm providing mid-market deal flow and investment opportunities for a select number of private equity and corporate clients. TSG sources and originates investment opportunities that fit their client's strategy, size and focus on an opportunistic and a specific search basis. 

Mr. Stidham is a Sales and Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment. He has served as the head of entrepreneurial organizations as well as Fortune 500 companies. He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms. 

Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions. Mr. Stidham has instructed thousands of business owners on how to prepare for a successful exit. He improves operational efficiencies leading to significant increased value.

1st Decision in an Acquisition/ Investment Can Be the Most Important

Right Target - Right Price

The First Decision Can Be the Most Important: Whom to Acquire/ Invest Into? Treat Price and Strategy as Related Elements.      

 by Terry Stidham, Target Search Group  

 

RIGHT TARGET: The first decision in an acquisition/ investment can be the most important: Whom to acquire or invest into? Going down a road after the wrong target can be a significant drain on organizational resources even if a deal never takes place. If you do commit, a false step can stick with you for a long time. 

Even worse, you may miss a universe of opportunities that were closer fits in the first place.

Get your senior team aligned on the strategic criteria that matter most to you. Then develop a long list of relevant prospects and filter that list to create a short list of priority targets. That sounds easy, but those filters are choices that represent your strategy. At the outset, there’s little risk in considering too many targets.

 

RIGHT PRICE: Of course, the often most important near-term criterion is the price you’ll pay. Whether financed by cash or leverage, it should compare favorably to your anticipated return. If operating across borders, currency questions apply at the time of sale and later on when you’ll be trying to realize the value you sought in the first place.

It’s important to treat price and strategy as related elements. 

Due diligence is critical, and your CFO will be at center stage – not only to help analyze the assumptions behind the initial transaction but also to help preserve and create value as the new entity moves forward. A “good” price for an investment that doesn’t advance your enterprise goals may turn out to be wasted money and a distraction from your strategy.

QUESTIONS TO ADDRESS:

• What are your chief acquisition/ investment criteria: 
• Sustained earnings
• Presence in a certain market or geography
• Ownership of intellectual property
• New products or something else?
• What are the specific deal issues that can have the biggest impact on valuation and return?
• Will the target require a cash infusion to operate even after you’ve paid to own it? Will that add to your debt load?
• Who else is competing to acquire your target? Do you have alternatives?
• What cultural issues will influence your post-merger operations?
• Are your accountants and theirs able to work together?
• What do you know about the people behind the brand you’re thinking of acquiring?

ABSOLUTES AND DEAL BREAKERS: Your senior team should be aligned on strategic priorities for M&A. Write down five criteria your acquisition should satisfy to be worthwhile in your eyes. Then write down five deal breakers that may likely disqualify a target, no matter how attractive in other ways.

CONTACT US: For more information on sourcing acquisition or investment opportunities, please connect with us at info@targetsearchgroup.com

Here Come the CVC's

Corporations Dive In With CVC's by Terry Stidham

An increasing number of our corporate clients are setting up an in-house CVC team. The Corporate Venturing Capital (CVC) community recently had a US conference, where nearly half of the 450 represented organizations present had set up a corporate venturing arm during the previous five years. The remainder of the group is planning to set up a unit within the next 12 months. 
 

Corporate Venture Capital (CVC) - CVC as a subset a venture capital whereby a company is investing, without using a third party investment firm, in an external start-up or early stage venture that it does not own.
 

Corporate Venturing refers to when a company supports innovation and new projects internally. It is defined by the Business Dictionary as the "practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise; the objective is to gain a specific competitive advantage.
 

The London-based, Global Corporate Venturing magazine ranks CVCs and sees funds with $billions available, some (such as Google) investing $300+ million per year. Deal volumes vary from just one to over 80 per year.

In the last two years, more than 200 corporate venturing units have been launched. In 2011, over 500 corporate venturing units globally invested more than $26 billion, which is similar to private VCs at about $28 billion.

CVCs are on the way to becoming more important in providing venture capital than VCs. These figures omit business angels, who provide, worldwide, $20 billion or so.

Some will argue that this trend is cyclical, but Corporate Venturing is definitely on the ascendancy in this decade and for good reasons. Venture Capitalist funding has declined as exits are scarce and raising new funds is difficult. Despite the global problems of the last half decade, businesses in whatever stage of their lives still need funding, which may come from various sources such as customers, loans, grants and equity.

The big challenge for both VCs and CVCs with or without an internal business development team is sourcing quantity and quality opportunities that are aligned with their investment strategy, criteria, and focus.

Companies find it easier and less costly to buy innovation than to develop it in-house. This is due to a mixture of the agility of smaller organizations, the ability for a small company to motivate and reward high caliber people and the freedom from corporate structure and processes. 

There is a significant difference in the return calculation between the two funding classes. 

1. Private VCs - Measured by financial return (although a small minority also use social enterprise metrics). 
2. CVCs - Measured by an organization and even deal-specific mix of financial and strategic return.

This doesn't mean it is any easier for an investor to steer through the negotiation and due diligence process (and in fact it may be tougher, as some corporations impose internal investment processes on external opportunities), but it does mean that, if the strategic fit works, CVC money may be available where VC money is not. In addition, many VCs have time-limited funds – commonly five years to invest followed by five years to divest. Most CVCs do not have these pressures.

Both VCs and CVCs need to see a minimum monthly recurring revenue before taking it further. However the VCs then would dig deeper into the financial numbers, whereas the CVC would first look at how their own product and channel infrastructure could help with scaling their business.

Early stage or growth stage companies that are seeking $1 million plus in funding should put one or more CVCs on their list. It's important to understand the strategic aims of those CVCs before approaching them. If CVC money is available it needs to be determined if it would prevent other similar corporations from becoming customers and/or potential acquirers. 

Contact us today to discuss your needs or interests.
 

About the author Terry Stidham
Terry Stidham is the founder and principal of Target Search Group. He is a B2B Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment.  He has served as the head of entrepreneurial organizations as well as Fortune 500 companies.  He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms.

Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions.  Mr. Stidham has been instrumental in aiding thousands of business owners prepare their businesses for eventual sale by teaching them how to maximize efficiencies in operations leading to significant increased cash flow.

Target Search Group (TSG) is a business development firm that works with a select number of private equity investors and corporate clients to source and originate investment opportunities that fit their size, focus and strategy on both a generalist, opportunistic, and a specific search basis. 

TSG sources acquisition and investment opportunities throughout North America in companies that range from startups to businesses with revenues up to $500 million.

Keeping the Culture

Maintaining Company Culture in an Acquisition Can Be Crucial to Its Success

by Terry Stidham

Many company founders don’t set out to establish a unique company culture, yet according to a Mercer Culture Integration Snapshot Survey; almost 75 percent of deal teams regard culture as a key component in creating deal value.

That’s because a company’s culture is often a major factor in defining its role in the marketplace. That culture is developed largely according to the personality, background and values of its leaders. Since most businesses start out with a small, closely knit team handpicked by their founders, certain attitudes, visions and values simply become “how we do things around here.”

The resulting company culture becomes a major contributing factor in the company’s failure or success.

During an acquisition it can be difficult to maintain a company’s culture - yet failure to do so can undermine the business’s ability to perform as expected.

The Sweet Taste of Success: A Case Study

Ben & Jerry’s Ice Cream is a household name today, but in 1978 it was just a dream thought up by two men who had first met in 7^th grade gym class. Neither knew quite what to do with his life, so they identified a shared passion—ice cream—and decided to start a company together.

Ben Cohen and Jerry Greenfield had strong social convictions, leading them to buy only from local farmers and to give 7.5% of their pretax profits to charities. They developed a company culture based largely on social responsibility and left-leaning social activism.

When the company sold to Unilever in 2001 its stock price had begun to fall.  Although its customers loved the unique brand, which was Fair Trade Certified and used environmentally friendly packaging with flavor names like “Imagine Whirled Peace,” its alternative management style lacked the fiscal and managerial discipline analysts and investors demanded.

So Unilever was faced with a challenge: how could it maintain the Ben & Jerry’s image, while mixing in some much needed discipline?

3 Tips for Maintaining Company Culture 

Tip 1: Create a plan to keep core cultural principles—and make it part of the deal. 
In Ben & Jerry’s case, The New York Times reported that Unilever agreed to something called the “social mission process.” Unilever agreed to commit 7.5% of profits to a foundation and agreed not to reduce jobs or alter the way the ice cream was made.

Tip 2: Realize some change is inevitable, but it can go both ways.
The company’s founders, both Ben and Jerry, continued with the company with board seats after the acquisition, and the deal included plans for Ben to work with Unilever on evaluating its involvement in activities like protecting the environment—integrating some of Ben & Jerry’s culture into the larger organization.

Meanwhile, Unilever brought in a new CEO, Yves Couette, to manage the brand and help institute some much needed discipline. Yet even that was done with care—Couette took the time to adapt his management style and organizational decisions to fit within the existing culture, allowing him to gain trust and build credibility with Ben & Jerry’s employees and, ultimately, allowing for the best of both to succeed.

Tip 3: Start integration early and communicate the plan effectively.
The Ben & Jerry’s deal happened in the public eye, so everyone was aware that change was coming. Blindsiding employees often leads to increased stress over how the change will impact them individually.

While some deals need to be kept under raps until some form of agreement is in place, the sooner both companies share their future trajectory and allow employees at every level to begin adapting, the better. Make sure to “sell” the deal internally as well as externally to all stakeholders.

While implementing these tips won’t guarantee a smooth M&A transition, they are a good first step to getting the companies in sync.

Top 7 Rookie Buyer Mistakes

Buyer Be Aware 

by Terry Stidham

1.    Not Doing the Math

Let’s say you’re Company A, and you have your eye on acquiring Company B. 

Ideally, 1 plus 1 will equal 3 or something greater.

Then why does it often turn out to be more like 1 plus 1 equals 1.5? 

You need to understand what the combined companies will look like. Start with an analysis of the strengths, weaknesses, opportunities and threats of your company and the same analysis of Company B and then do a combined analysis, the ‘layering effect.’ What are the savings? What are the cross selling opportunities? What the threats, like loss of customers or key employees? Are there any legacy issues that can present problems?

Of course it’s easier to the analysis on your own company (though I am surprised at how often companies don’t) than it is do to it on an acquisition targets, especially a privately held one, but you can still get information on your acquisition target. There are sources like Factiva, Capital IQ, D&B, Google and then there are the industry publications. 

Have your key management speak to other people in the industry to help size up your target. This can help you get a sense of what the two companies really look like together. You also have the right at some point in the process to look under the hood and inspect the books, speak to customers, vendors and key employees. I have developed an in-depth confidential questionnaire to uncover the good, bad and ugly.

2.    Letting Emotions Drive the Deal

As CEO, you are undoubtedly passionate about your business. That’s to be expected and applauded. Getting emotional about completing a deal is different. The tendency is to get excited about the possibilities of buying Company B, and before you know it your enthusiasm becomes infectious, to the point where your key management does not challenge you about downside risks of doing the deal. Getting emotional can keep you in a deal that shouldn't go forward.

3.    Lack of Perspective

Losing perspective is about getting lost in the process. If you've invested a lot of resources – time, talent, money – exploring the deal, it’s easy to think that you have to go forward with the acquisition irrespective of the price you pay. Ask yourself why you want to buy Company B. In your analysis, does it contribute to the top and bottom lines? Do you gain a new distribution channel? Does it eliminate a competitor? Make sure that it is a well-founded rationale and a sound business case that is 
moving you forward, and not the sheer force of momentum. 



4.    Ignoring the Red Flags

There can be hundreds of potential red flags.  Don’t ignore them. Don’t try to justify them away. Dig deeper, ask questions, and if you aren't satisfied with the answers or can’t find resolution, walk away. Red flags are signals to pause or even stop. Failing to do so is often a byproduct of getting caught up in the deal or losing perspective. Don’t close your eyes to the red flags. 

Did Company B have unusual charges or losses that aren't adequately explained?

Does the predictive index (assessment) on the CEO show instability?

Is there unusually high turnover on its management team?

Are there troubles fulfilling orders? If so, why?

Are there cultural gaps or differences in competency levels that will make it difficult to combine people and departments from both companies?

5.   Thinking Inside the Box

Let’s say you see some red flags, or deal just does not make sense. It’s time to review your other options. What if you only bought part of company B? Or maybe it would make sense to partner with another party to do the acquisition.  What about a joint venture? How about structuring the deal where instead of buying Company B for $30 million outright, you pay $20 million upfront and $15 million in potential earn-outs?

It is important to understand your alternatives. I recently had a client who wanted to purchase a company to expand his distribution and increase his overall sales. 

I performed as assessment of his company and the company they were interested in acquiring.  The analysis showed that the client really needed 20% of the target company. Why pay for 100% of a company if you only need 20%?  I recommended that my client partner with one of the other potential acquirers. The end result is that the client paid 10% of the total purchase price for the 20% of the company that he needed.

6.    Not Placing Yourself in the Seller’s Shoes

Your interest and Company B’s are not aligned. You want to pay the lowest price possible and possibly structure the deal with a future payout; they want to get the best price possible—now! Obviously under that scenario you both can’t get what you want and can often stall or kill the deal.

Put yourself in Company B’s shoes to understand why they are selling. Is the CEO looking to retire or play a transitional role? Is Company B being sold at the height of the market? Are there negative trends in the industry that are eluding you?

7.    Failing to Make the Case for the Deal

Try to prove your key points as to why you should acquire Company B.  

Can the two combined cultures really work together or are the management styles and daily ways of operating incompatible?

Can you gain incremental customers or will they leave to go to your competitors?  

Can you really achieve your cost synergies

How will your people and customers fare during the acquisition? 

Can you structure a deal so that you don’t overpay? 

You need to run worst-case, middle-of-the-road case, and best-case scenarios for the acquisition. 

Being aware of these mistakes should help you avoid them. Align yourself with seasoned advisors and remember your real work begins once you complete the acquisition.

Outlook for Mid-Market M&A

Location is to Real Estate as Timing is to Deal Making

by Terry Stidham

A unique set of factors has coalesced to form a “Perfect Storm” of M&A activity;

• A slow yet improving economy
• Historically low interest rates
• Supply and demand
• Strong appetite among many businesses for growth through acquisitions

Along with this heightened activity come opportunities and challenges;

• More competition for quality acquisitions
• The risk of cutting corners in due-diligence
• Real choices about whether to “buy it” or “build it”

RSB Citizens prepared an in-depth report on the current state of mid-market M&A activity based on a recent survey of more than 300 business owners and decision makers, supplemented by a series of in-depth interviews among U.S.-based mid-market ($5MM – <$2B in revenue) business executives that are open to or are currently engaged in some form of corporate development activity, including mergers and acquisitions and raising capital in the New England, Mid-West, and Mid-Atlantic regions.

KEY FINDINGS

OVERVIEW

The report points out that “In today’s slowly improving economy, many mid-market companies are finding it challenging to increase revenue through organic growth. As a result, acquisitions have become a common and sometimes essential strategy for increasing market share or improving distribution. Furthermore, for companies that decide to build it rather than buy it, their growth is being fueled through:

• Reinvestment
• Leveraging low interest rates
• Increasingly available sources of outside capital from private equity and commercial banks.

While it would appear that the present environment makes completing a transaction easier than ever, buyers are wary of inheriting unexpected liabilities in the process of making an acquisition, perhaps in their haste to “do a deal” or their inability to conduct sufficient due-diligence. Meanwhile, sellers struggle to fully understand their many options for achieving liquidity or fueling growth, including the possibility of selling only a portion of their business to remain in control or provide the opportunity for a “second bite.”

While not all buyers or sellers will rely on an external advisor for support meeting their M&A objectives, those that do will see a whole host of areas where their familiarity and knowledge of the process provides considerable value. While their number one concern is determining an appropriate valuation for their company, sellers (and buyers) also want:

• A better understanding of bidding strategies
• Support with due diligence
• Help to identify the widest possible set of potential target firms.

Whatever advisors, sources of capital, or course of action they elect to follow, buyers and sellers alike would be better served – especially as the expected pace of transactions accelerates – to carefully consider the increasing number of attractive options available to them in the age of transaction-driven growth.”

THE BUYER’S PERSPECTIVE

“It’s a buyer’s market!” – Or is it? Market conditions lead to opportunities for growth through acquisition, but competition is fierce and diligence is key.

• Buy, Buy, Buy! Interest in acquisitions is widespread. Nearly 80% of mid-market firms say they are currently engaged in or are open to making an acquisition. About one-quarter of these firms are currently in the process of making an acquisition, while an additional 14% are actively seeking purchase targets. The remaining four in ten firms are not actively looking to buy but would consider an acquisition if presented with the right opportunity. Regardless of their current status, all firms agree, the core objective of acquisitions is to drive revenue growth.
• Businesses have (or can readily acquire) the means to make deals happen. Mid-market firms making or looking to make an acquisition anticipate that the deals will be comprised of about equal portions
• Cash (35%)
• Debt (35%)
• Equity (30%)    Given that executives perceive debt as easy to obtain (and the cash and equity equations are largely within their control), funding deals will not hamper deal activity.
• Yet cash and enthusiasm are no substitutes for certainty or prudence. Despite their zeal for acquisitions, only three in ten mid-market firms actively seeking a deal feel highly confident they will actually complete an acquisition in the upcoming year. There are some factors that likely contribute to firms’ concerns about their ability to get the deal done, and those looking to extract commensurately greater value from their acquisitions should take heed:
• Don’t rush the deal, do your diligence. Chief among the concerns cited by all current or potential buyers is the prospect of inheriting liabilities and/or failing to conduct adequate due-diligence. Firms in a hurry to put cash to work may end up with a serious case of buyer’s remorse, or worse, buying a ticking time bomb.
• Remember, you’re not the only game in town. With more likely buyers than sellers in the mid-market, firms will need to look below the mid-market to make acquisitions where competition is high and inventory is limited. Meanwhile, the low cost of debt is giving target firms an attractive alternative to selling. Identifying the most appropriate targets, developing considered value propositions, and bidding strategically are key to success in this buyer’s market.
• Easy debt and market optimism may obscure the value of external support. Despite their trepidations, less than one in three mid-market firms intends to engage external advisors in their acquisition process. But of those bringing in an external partner, valuation is by far the top task where firms are looking for assistance.

THE SELLER’S PERSPECTIVE

“Valuation is king” — yet many sellers unknowingly hinder their ability to maximize their valuation by failing to approach the market from a position of strength.

• There’s a lot of talk about selling, but little action. Although current selling activity is low, interest is significant with one in three mid-market firms saying they are open to being fully or partially acquired by an outside investor. However, most firms open to a sale are not actively seeking a buyer, let alone entering into a full M&A process – running the risk that they will be undervalued or fail to find the best deal structure.
• Many sellers are unsure of their value, and what the market will bear. Being underpaid or undervalued is the top concern among current and potential sellers, especially among smaller firms with between $5MM and $25MM in annual revenue.
• Getting the most out of a sale means avoiding these undervaluation pitfalls:
• Misreading the market. Nearly three-quarters of mid-market executives view conditions today as a buyer’s market, and 55% believe that it will stay that way through 2013. In fact, the current market has led to a larger number – and wider array of – buyers, as well as an increasing number of appealing self-funding options.
• Misunderstanding the market. Most executives surveyed anticipate wanting or needing to sell off their entire firms. Yet, the majority of active deals in the mid-market are for a partial sale. Executives seeking a full sale oftentimes lack a full understanding of the various structures available to maintain a majority or partial ownership stake while also raising the funds they need or providing the liquidity they desire. In many cases, the parts may be worth more than the whole in terms of long-term opportunity and the ability to maintain control.
• Showing your hand. A desire for liquidity or fatigue continues to drive many to be interested in a full sale, leaving them vulnerable to taking less than they are worth, particularly if there is no formal process in place.
• Only a minority of sellers engage “the experts.” About four out of 10 sellers have or would consider having an external provider manage their selling process. Among the number of tasks these firms would engage a provider to handle, valuation is by far the most mentioned, though help with bidding strategies and due-diligence is also widely sought.

GENERAL MARKET OUTLOOK

Key indicators reveal that markets are ripe for transaction-driven growth.

Corporate development departments are firing on all cylinders. In a sluggish economy, mid-market executives clearly see corporate development as essential to driving growth. With the vast majority of mid-market firms currently engaged in or open to a minimum of three corporate development activities in 2013, all options are on the table when it comes to driving growth.

Acquisitions are clearly of greatest interest, with about eight in ten mid-market firms saying they are currently in the process of making an acquisition or are open to doing so within the next 12 months. In fact, mid-level managers say they are as likely to consider an acquisition as reinvesting earnings, further signaling that organic growth may be seen as less effective path to growth today than in previous cycles.

Buying is certainly more prevalent than selling in the mid-market, with less than one in ten reporting that they are currently the target of an acquisition. However, a sizeable proportion of the market (31%) is open to being acquired over the next 12 months.

Meanwhile, about two in ten are currently attempting to raise capital, with an additional 44% saying they are open to doing so in 2013. With current interest rates being at an all-time low, many firms see leveraging external cash as a more appealing option to diminishing their working capital.

Optimism about the future M&A market dynamics is high. More than half of respondents anticipate that the environment for raising capital and seeking outside investment will improve over the next twelve months.

Furthermore, deal volume is often driven by market participants’ view of future asset values. Over half of mid-market executives believe today’s prices will remain stable, and over a third believe they will increase.

The supply/demand equilibrium for M&A is likely to shift to support greater activity in 2013. On the supply side, demographic factors affecting private mid-market firms will emerge as a significant motivation for sales or equity offerings... Many aging baby boomers who have spent the past 20 years growing family businesses will look to monetize value for retirement. In addition, private equity firms that postponed selling portfolio companies in 2012 or took advantage of dividend recaps to return capital and buy time, will test the market for exits in 2013. On the demand side, larger companies will be under increasing pressure to show top and bottom line growth. Given current market conditions, organic growth will continue to face headwinds, resulting in further reliance on acquisitions to gain market share and/or expand operations.

What better way to grow?

Regardless of their current acquisition status, all firms agree that the core objective of acquisitions is to drive revenue growth (70%) (Figure 3). Secondary objectives, including expanding geographic reach (41%), improving operational efficiency (41%), adding adjacent products or services to core offerings (41%), and putting cash to work (40%) are viewed with about equal import. Across industries and firm sizes, increasing revenues is always the dominant motivator to acquire. Following revenue, however, firms in different verticals or with different revenue sizes tend to focus on different reasons to buy. Smaller firms with between $5MM and $25MM in revenue, as well as firms in technology or science industries, are more apt than others to view acquisitions as a means to expand their staff and purchase new talent. Meanwhile, mid-sized firms of the mid-market (annual revenues of $25MM to $100MM), and many manufacturing companies are more likely to look to acquisitions to improve their distribution capabilities.

Terry Stidham is the founder and principal of Target Search Group. He is a B2B Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment.  He has served as the head of entrepreneurial organizations as well as Fortune 500 companies.  He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms.

Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions.  Mr. Stidham has been instrumental in aiding thousands of business owners prepare their businesses for eventual sale by teaching them how to maximize efficiencies in operations leading to significant increased cash flow.

Contact me today to discuss your exit or acquisition strategy.