Talking Point: Does M+A = success?
It is never easy to do business and so many organisations seek a formula for success. Given the current challenging economic conditions, numerous companies are sensibly considering avenues which may afford survival as a primary objective, with growth and profit being secondary.
A number of accountancy and legal firms seem to believe that M&A can equal success, achieving both primary and secondary objectives. There is much to support that thinking, but it is not straightforward.
It’s surprisingly common for the owners of the most suitable and best-matched practices to either go about their business unaware of another company’s strategy or ambition or feel that their business would be of little interest to a prospective purchaser even though they would welcome an appropriate approach. Such misconceptions result in firms not registering on the radar of prospective buyers or partners.
Many buyers assume that there will be an ‘adequate’ business actively seeking overtures. Consequently, they adopt an administrative process to drive the project with a primary motive of minimising cost and so the right business is never brought to the table.
The fundamental focus of “going to market” must be “who can we acquire or merge with that will develop our practice the most effectively in line with our objectives”, maximising the value of the outcomes by finding the right organisation, whether consciously in the market for M&A or not.
Firms should turn to those who can make the right connections and open doors that would otherwise be closed or even unseen.
Knowing which company is notionally available on any given day is something of a lottery. The focus should instead be on delivering the right message to the right business in the most effective way.
It is about speaking with business owners and directors and getting to know very well the exact needs of their businesses. This hard-earned intellectual property then allows a company like ours to recognise and attract the right firms and practices to clients according to their business needs.
With a strategically sound methodology driving it, M&A activity can do much more than support business survival. For some of our clients it has led to growth in market share, turnover and profit, while for others it has offered them the freedom and finance to conduct other business ventures or enjoy retirement. One cannot really argue with the numbers - the evidence of our experience is that, with the right partners, M&A can equal success.
Justin Hodgin is managing director of the accountancy division of Birmingham-based accountancy and legal M&A specialist Ortus Group
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