Most management teams aren’t thinking in these terms right now, but some companies are growing their businesses through mergers and acquisitions in a time marked by some of the most severe changes our economy ever has ever seen. These changes are creating opportunities for many companies to achieve greater degrees of horizontal or vertical integration in their industry by buying competitors, suppliers, or distributors. Those who are in a position to make a strategic acquisition usually have been well managed, are fiscally conservative, have a good relationship with their lender(s), have predictable revenues, and have profit margins that will withstand the various changes in pricing that may occur. Only by exploring these opportunities in a time of general economic turmoil can a company create an opportunity to achieve significant future success through growth.
A company should start this process by knowing as much as possible about the companies you may want to buy (the “Targets”). Determine the strengths and weaknesses of their management team and begin to envision how they could be integrated into your business to strengthen your competitive edge. Seek the advice of your management team and outside professionals to identify and review the Targets.
Once you have evaluated a number of Targets and narrowed your choice, it is essential for the decision makers of the two companies to sign a Confidentiality Agreement that will allow you to have substantive discussions about the acquisition while preserving the confidentiality of both companies’ information. The greatest challenges in pursuing this course of action are to be confident when others are scared, and to achieve a structure for the purchase that will not put your existing company at risk.