How M&A Can Drive Inorganic Growth

Sixty percent of Middle Market companies report that inorganic growth is a key part of their growth strategy, according to research by the National Center for the Middle Market. Each year, approximately 20 percent of Middle Market firms acquire a company and roughly five percent sell or divest part of their organization. The executives of the companies surveyed expect merger and acquisition activity to drive more than a quarter of their growth. Despite this reliance on inorganic growth, most Middle Market companies reported minimal M&A experience and multiple struggles with the process.

Inexperience makes M&A process seem more difficult

Of the companies surveyed that had completed a purchase in the last three years, almost one third (29 percent) were completely new to the process and an additional 40 percent had limited previous experience. For companies on the selling side, only one in ten companies reported any significant previous sales experience. With so many leadership teams being completely new to the M&A process, it is no wonder that more than 40 percent of buyers and 50 percent of sellers considered business valuation and assessment to be extremely difficult. Similarly, 44 percent of both buyers and sellers reported that post-transaction integration was a major challenge (i.e. integrating technology systems, administrative processes, staff, and culture).

Experienced advisors increase the likelihood of a successful deal

Fortunately, there is one clear cut way for Middle Market companies to increase the likelihood of M&A success. Ask for help! According to the same research, Middle Market organizations tend to turn to internal executives or top managers to begin the M&A process. Only one-third of buyers looked for targets with help from an external law firm and fewer worked with consultants or investment bankers. Sellers were even less likely to work with external experts when looking for buyers.

Turning only to internal leadership when beginning an M&A journey is very limiting. External experts have access to experience, expertise, and resources that dramatically increase the likelihood of a successful and profitable transaction for all involved. They also introduce the very necessary quality of objectivity into the process, which is absent when deals are kept entirely in-house.

Symmetrical helps Middle Market companies to strategically assess their needs and prepare for big transitions. If you are considering buying or selling a business, please contact us for a confidential discussion about how we can help.