The Advantage Small Businesses Have In Achieving Successful M&As
Discussion about organic vs. inorganic growth aside, two thing make merges and acquisitions highly viable options: the increased availability of private equity for smaller transactions and the swell of small and medium businesses to choose from due to retiring Baby Boomers. Because of these two, mergers and acquisitions are just as viable for small- and medium-sized businesses as they are for the big players. In fact, in some ways, SMEs inherently possess advantages which the larger corporations do not, which can lead to greater success. Provided that the dealings are undertaken carefully and for the right reasons, expansion by M&A should not be dismissed out of hand.
The primary problem in achieving a successful merger or acquisition is lack of due diligence. For a small to medium enterprise, fees to lawyers and analysts do not have to reach the stomach-churning numbers seen in those much larger company transactions. In smaller businesses, much of the due diligence can and should be done face to face and with every level of management and employee, whereas in transactions that command hundreds of millions or billions, rapport up and down the integrating spectrum is not possible. When managers and directors can be counted by name, a much better feel for potential issues can be obtained in building in good relationships between buyers and sellers. The work of the lawyers is to make things legal, not hammer out operational negotiations that will then be handed down by fiat.
To be successful, the purchaser and seller must match well in purpose as well as in systems. While the former is somewhat easier to ascertain, discovering and addressing culture clashes and conflict in the operations, technology and support can be trickier. The smallest variance could grow into a source of friction. The advantage to assimilation in smaller companies is the face to face connections developed from the beginning considerations.
Commensurate with care in integration, great care must be taken in establishing effective communications. Considering the high level of tensions involved in mergers and acquisitions plus running the business in general, check-ins must be frequent, open-minded and honest, and the atmosphere most conducive to this can be much more easily achieved because of the personal nature of the work of due diligence.
It takes dedication and alertness to manage both a good-running business and a successful purchase and merger. The issues inherent to each will stretch the most adept manager, but it will tax the smaller operator less than the new owner of multiple locations on multiple continents negotiating on a myriad of fronts. While the biggest company directors can delegate, the smaller company directors, by allowing adequate time, can be much more personally involved and responsive during the unfolding assimilation, and therefore more likely able to anticipate and correctly respond to issues.
As always, I encourage business owners to seriously consider mergers and acquisitions to grow, taking the time to do it for the right reasons and with the proper care. The one thing that does not get much press in the business world—the beauty of small company mergers and acquisitions—is the incredibly personal stamp buyers are able to put on their new creation, as they craft the results hands-on. The greatest pleasure that often escapes those who own and run the multi-billion dollar businesses is the pride that can be taken in consciously and proactively building a company that positively impacts employees, their families and the community as a whole.
