I recently read an article through DealBook indicating that the Obama administration will increase antitrust enforcement during its tenure, raising the anxieties of many on Wall Street.
In the big picture, I don’t think this increased oversight will have much impact on middle-market deals - after all, it’s usually only the really big deals that could have monopoly implications.
What stuck out for me in the article, though, was the following statement:
Economic downturns tend to force executives to find ways to reduce costs…
Merging with a rival, and reaping the synergies that come from eliminating duplicative functions, is a crucial component of any manager’s recession survival tool kit…
It’s my belief that while cost-cutting is one way to deal with a tough economic situation, it can only help you tread water for so long.
Proactive growth proponents look at a complementary acquisition or new market entry opportunity as a chance to increase revenue and cross-sell - leading to more significant growth in the long run.
I often find that the cost-cutting aspects of these deals are a way to get more conservative finance colleagues to sign off on the deal. The benefits are real and helpful, but cannot by themselves lead to sustainable growth.
Although many executives are just trying to weather the current storm, I believe that those that are bold with their growth moves will come out significantly stronger once it passes.
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