Big Plans For Small Companies
Mergers and Acquisitions (M&A) seem fancy and sophisticated, until you notice everybody’s doing it. Small companies are being snapped up at a ferocious pace. And the lists of publicly traded companies (on stock exchanges) has been cut in half. Doing business with this crowd is going to take a special touch.
An excellent Candidate, doing all kinds of mysterious high-tech stuff, gave me his list of favorite companies. I dutifully looked up his selections, and —with just a little bit of research— discovered that every single company had been purchased within the last few years.
Interesting. I suddenly had twice as many names. There was the original list. And there was a matching list, showing all the new owners.
So, who’s calling the shots? The purchaser usually claims that everything will stay the same. They’ll just add some resources and enhancements to make things better.
Maybe they will.
Win/Loss Ratio
As Forrest Gump’s momma once said, “Acquisitions are like a box of chocolates. You never know what you’re going to get.”
Sometimes acquisitions thrive. And sometimes they blow up, spectacularly.
One poorly executed buy-out caught the employees by surprise. More than half the company left and joined a competitor. The good news… that was before the expansion and new facilities were started.
The bad news… each failure triggered the next failure. Eventually, the incoming managers packed up and they went home.
It can get really, really ugly.
The Strategy
On the Buyer’s side, the plan is to keep failures small. The only way to do that is to acquire small companies. Young operations with promise, that haven’t hit their stride, yet.
Almost by definition, small companies are top heavy. They have more leadership than employees. In startups, the employees are the founders.
At best, the Buyer is getting good leaders with a strong premise.
Anything beyond that is speculation.
Bottom Line
Private purchases of existing companies are a popular growth strategy…
- They offer a direct route to demonstrated leadership.
- Existing teams add power.
- Established products, services, and discoveries build a competitive edge.
- And it doesn’t hurt that existing customers may continue to pay the freight.
Accelerated growth comes from resources and connections provided by the new Parent Company.
Put it all in a fast-moving high-tech market, and impressive things can happen.
-TD