Clients always want to know how  we can quickly understand the perspective of the owner of the acquisition target.  Over the past 15 years focusing on the privately-held, not-for-sale space, we have a 98% success rate getting our clients in meaningful conversations and meetings with companies that are deemed to be a strategic fit.

The reason the Capstone approach is so successful is that it is truly unique – and we continue to hone it every day.  Many clients and prospective clients have experience ‘attacking’ owners with bulk mail and cold calls - which are almost always unsuccessful. Owners on the receiving end of this barrage tell me, “I get calls from people who want to buy my company every day.  I ignore them.”  This is in addition to CEOs who tell me that generic letters go straight into the ‘round file’.

If you were to talk to owners we target, you would hear a much different response.  Usually, it sounds like “I am not sure why I returned your call but something was different about you.  It seemed sincere…you know more about us.  It makes sense.“

You need to have the right data to deem a company attractive.  You need the right information to ‘open the door’ with an owner.  You need to have a well thought-out approach and story for the owner.  Remember, they not only don’t need to sell – they don’t need to talk to you.  Consider how you can alter that dynamic.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, External Growth, Growth, John Dearing, M&A, M&A News, m-and-a, mergers, Mergers and Acquisitions, owner contacts, owners

I was asked during a recent client review for my recommendation on when it was appropriate to divulge  leadership’s M&A intentions to the Board.

Based upon my experience, there is no time like the present. You want to avoid surprises. You want to get questions out “on the table” in time to develop answers. You want to avoid ‘dart throwers’ by getting your Board ‘on board’ with direction and rationale. You want to make recommendations as leaders but appropriately use advisors or the Board as ’sounding boards’ so you can develop the right analysis and complete due diligence to the satisfaction of the ultimate decision makers.  This will enable you to maintain deal momentum with the target owner.

I could go on but, “why wait?”  Engage with your Board, educate them on you market and prospect criteria, and keep them informed.

M&A is a “big” decision, so work toward alignment and get the Board involved early.  You will save valuable resources - both human and monetary.

Technorati Tags: Acquisition Strategy, acquisitions, board, business acquisitions, Capstone, due diligence, External Growth, John Dearing, M&A, m-and-a, mergers, Mergers and Acquisitions

Our buy-side clients at Capstone are seeing the same trend that a recent Reuters article reported: “Companies are making moves to divest assets that are not essential to their operations, while stronger firms, nudged on by their boards and shareholders, are looking to grow and position themselves for the recovery.”  This leads to numerous “orphan” non-core product lines and/or business units.  This is resulting in increased deal flow, with more silent auctions and calls coming in from around the globe.  Further, JPMorgan noted: “We are seeing a pickup in serious strategic discussions that would give us more optimism for 2010.”  Capstone’s pipeline is strong and growing as proactive external growth requirements are driving leaders to “come out of the woodwork” looking for strategic assets that will offset their deficits on the organic growth side as they refine their 2010 budget forecasts.  Do you need to fill a gap? Consider that technologies and product lines are “on the market”.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, divestitures, External Growth, John Dearing, M&A, M&A News, mergers, Mergers and Acquisitions

PWC released its second quarter report on M&A activity in the industrial products sector.  Two items from the report stood out for me.  First, M&A activity in the second quarter actually rose compared to the first quarter of 2009 (although still down significantly compared to last year).  This could be a sign that some of the fear that has gripped the marketplace is beginning to subside.  Second, the following quote struck me:

Strategic buyers continued to act as the main investors in the majority of deals in all segments of the industrial products industry as financial investors remained on the sidelines because of continued tight credit markets and a lack of liquidity.

Cash continues to be king.  Companies that have cash are using it to snap up weak competition and make strategic moves to strengthen themselves for the future.  They are making small, targeted acquisitions to calibrate their business.

At Capstone, we are continuing to push our clients to be active buyers in this market.  Our mantra remains: “If not now, when?”

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, External Growth, Growth, John Dearing, M&A, mergers, Mergers and Acquisitions

I recently appeared on Jacobson & Katz: Inside Maine Business to discuss the current state of the mergers and acquisitions market, as well as the Capstone approach to the M&A process.

You can view Part One here:

And Part Two, here:

To see other episodes of Jacobson & Katz: Inside Maine Business, visit www.insidemainebusiness.tv

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, External Growth, John Dearing, M&A, M&A News, market research, Mergers and Acquisitions, video

Recent news indicates that the federal government will “prop up” the major banks if they continue to falter.  This has some worried that these large financial institutions will be “nationalized”.  The government says that this is not the case:

The strong presumption of the Capital Assistance Program is that the banks should remain in private hands.

Simply put, the government is making a minority investment in these banks, and there is a question of how much control the government will have in these institutions.

Similarly, when we suggest to our clients the possibility of a minority investment in a company instead of an outright acquisition, we sometimes receive push-back over the issue of control.  In fact, in two separate meetings over the past month, our clients’ expressed concern that they would “lack control” even though they would have a financial stake in the company.

A minority investment in and of itself does not mean that the majority shareholder has total control over the direction of the company.  In fact, you can own only 1% of the company and still put yourself in the driver’s seat to get the strategic relationship and benefits you want. The issue of control comes down to the way the minority investment (or any deal) is structured.

It is our philosophy to first find the right strategic prospect, win them over and then find a mutually beneficial solution to the deal structure to bring the two companies together.

Concern over control should not stop you from considering minority investment, or any particular form of external growth.

Technorati Tags: Acquisition Strategy, acquisitions, Capstone, John Dearing, M&A, M&A News, mergers, Mergers and Acquisitions, minority investment

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.

Technorati Tags: business acquisitions, Capstone, External Growth, John Dearing, M&A, M&A News, Mergers and Acquisitions