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This may be a bad time to vertically integrate, or it may be a great time to do so. But it is certainly an opportune time to consider strategic acquisition options.
The Middle East is in turmoil. The European Union and Euro are stressed. China devalued its currency and its economy shows all the signs of being in the doldrums. The United States is racing headlong into elections, with two bitterly divided sides and not much in the middle.
Sounds like a horrible time to buy a company.
Interest rates are near zero. Cash is plentiful and banks are lending. Baby boomers are reaching retirement age and many are looking to cash out of the businesses they’ve built.
Sounds like a great time to buy a company.
With the flood of small-to-mid-size deals closing, it appears much of the market has decided that the latter is the better assessment. They could be wrong, or right for themselves.
Top considerations
If your strategy has been founded on core competency, this is a propitious moment to consider modifying that. Look first to your supply chain.
- Do you have essential first, second or third tier suppliers that don’t have solid succession plans?
- Have some struggled meeting your increasing demands?
- Are any sole sources that could cripple your company should they go out of business or be transferred to a less capable or competitive source?
- Do you have long-lead time vendors that you could turn into great partners?
I am not encouraging business owners to make a major strategic shift. To do so without understanding the particulars would be unprofessional. What I am encouraging business owners to do is to look carefully at strategic opportunities to strengthen the business. Whether purposed by defensive or offensive thinking, a supplier important to future success might be a brilliant acquisition target.
Without the management breadth and depth to successfully operate or integrate a business, tread lightly. The best deals on paper don’t always meet those calculated and hopeful expectations. If a potential deal doesn’t make strategic sense, there are other ways to protect yourself.
This may be a bad time to vertically integrate, or it may be a great time to do so. But it is certainly an opportune time to consider strategic acquisition options.
