With financial difficulties hitting headlines, making a big decision like buying or selling a business might feel risky. But the good news is, the right deal can bring big benefits.
-
Some Courier online content is funded by outside parties. The revenue from this helps to sustain our independent news gathering. You will always know if you are reading paid-for material as it will be clearly labelled as “Partnership” on the site and on social media channels,
This can take two different forms.
“Presented by”
This means the content has been paid for and produced by the named advertiser.
“In partnership with”
This means the content has been paid for and approved by the named advertiser but written and edited by our own commercial content team.
That’s the verdict from Adam Maitland, Mergers & Acquisition (M&A) specialist and managing director of business advisory at Hutcheon Mearns. He says: “If you look out there, there’s no getting around it – inflation is the new buzz word, cost of living is through the roof and we’re headed pretty swiftly into a recessionary environment.
“If you’re a business owner or a shareholder in a business, how can deals support a more robust growth plan through market volatility?”
Using M&A to move forward
Now might just be the ideal time to act, taking steps to help see your business through the current climate and set it up for future success.
Adam explains: “2021 was a record year for M&A globally and 2022 is probably seeing, across all markets, a bit of a slowdown because of general economic uncertainty and geopolitical issues. But there’s always an opportunity to build value through the right transaction.
“The key is around mitigating business risk – that could be through adding in new technologies or additional geographic locations, or even bringing in new teams of people; all of which can have a materially positive impact on the growth trajectory of a business.
“Unfortunately, if you hold still you’re actually not holding still, you’re going backwards. Especially in this economic environment.”
For Adam, this is particularly true when it comes to investing capital. “At the moment, if you’re sat with cash you’re essentially losing money because inflation is so high, and whilst interest rates are rising, it isn’t offsetting a heightened cost environment. What you do with that cash has never been more important.
“One thing you could do with it is invest in your business – people, new locations or new technologies.”
5 reasons why now might be the time to buy or sell a business
Based off Adam’s experience in M&A, here are five ways a deal might benefit your business and bring long term value to shareholders:
- Consolidating the supply chain. A strategic merger or acquisition could give you a more favourable position and help optimise margins.
- Supplementing your products and services portfolio – selling more to your client base.
- Optimising your business – synergies are real cash and can bring immediate accretive value to shareholders.
- Boosting your Environmental, Social and Governance (ESG) capabilities. Adam adds: “There are continued pressures for larger companies, and companies across the board, to have better ESG capabilities in place. Certain acquisitions could support that, depending on what they do and what they bring to the table.”
- Adding new technologies and digital solutions. These might help you work quicker, more efficiently and for less money, whilst adding market share.
How to make the right deal when buying or selling a business
It might be a good time to make a deal, but Adam also cautions that it’s only a good time for the right deal. That’s why due diligence is so important.
Adam explains: “In these slightly more uncertain times, you want to be even more certain that it’s the right transaction for you.
“The buyers, and probably sellers as well, will want to do more diligence. That’s not just financial diligence, that’s about team integration, product and service fit, culture fit, and geographic synergies amongst many other areas – all of the things that can really bring value post-deal.”
Structuring a deal correctly is also key in order to mitigate some of the potential risk of M&A in uncertain times. Adam says: “That might be a mix of day one cash or deferred / earn out based consideration to ensure that all parties are aligned to deliver growth.”
Transaction advice, from structuring a deal to diligence, will help you do this properly. Adam ends: “It’s always a good time to look at strategic acquisitions, but it is harder at the moment so you need the right advice in order to bring the right value to the table.”
Find out more about how Hutcheon Mearns can help you get the best deal possible, whether you’re buying or selling a business.
