By Bradley S. Buttermore
Senior Vice President, Principal and CFO
Favorable mergers or acquisitions usually aren’t found right around the corner. In fact, some of the best deals in today’s global economy can originate on the other side of a border or on the other side of the world, for that matter. The key for the owner or major investor in a small to medium-sized business is to maintain a broad horizon. That ideal buyer or new investor – the one who is willing and able to exceed your expectations – can emerge from anywhere.
Of course, it’s always reassuring when the local economy is thriving, but an abundance of business opportunities shouldn’t mask the fact that the value of a business is likely at its peak when business is good. That’s when the timing is right for seeking a buyer for all or part of the company. Timing, after all, is everything.
And if your local economy is doing well, as indicated by the volume of business you’re doing, your area probably is on the radar for firms looking to grow by expanding into a new region or country. A fast way for a company to gain a foothold in a new market is to acquire a company in an already thriving market
One of the dangers for the owner of a growing business is that such a situation can breed complacency and nearsightedness. It would be a mistake to think that because the firm is doing well, sooner or later the right buyer will come knocking on your door. From a seller’s standpoint, the best deals are done when both the buyer and the seller are looking for each other.
Another danger is to think that the good times will last forever. The global economy, as well as every local economy, follows cycles. Upturns are sooner or later followed by downturns. The real risk for a business owner is to miss the upward trajectory of the business cycle and to consider a sale when the cycle has turned downward. The transaction value during a down cycle can be substantially reduced and, due to the nature of earnings multiples, the firm’s value may not recover for years.
A recent international corporate acquisition we helped close is a prime example of this. Through Capital Alliance’s affiliation with M&A International, an international organization of investment banking firms in all of the major global economies, we were able to work closely with Hason Steel, Inc. of Lanoraie, Canada, as it acquired Odom Industries of Milford, OH. We teamed up with another M&A International firm in Canada, FTM Synergis Capital of Montreal, to help Hason gain a foothold in the U.S. market and provide Odom Industries with the expanded resources of a larger company. In the end, this cross-border deal was closed to everyone’s satisfaction.
If you’d like to read more about the Hason Steel acquisition of Odom Industries, click here to go to the news release.