M&A Strategies -- Ultimate Survivor's Guide
To maximize your success, you must first optimize your cash flow. Survivors are mean and lean. Before making a bid on the next “fire sale” or planting your FSBO sign, get your shop into fighting shape. The economic meltdown has increased lender scrutiny, and most investment capital is on hold through year’s end. Yet, good financing options—and opportunities—will be available to those with solid cash flow.
Start by examining your monthly overhead. Take a look at your core needs—in people, resources, supplies, etc.—and remove what’s not absolutely essential. Do you have unused equipment that you could sell off? Are you overstocking raw materials? Are you providing free warehousing? Are there three (or more) people handling what two can do sufficiently? The economy gives you the opportunity to make tough decisions.
The second part of cash flow improvement is keeping new expenditures in check. If you need new, more automated equipment, so be it. But nice-to-have items—and their risk—should be avoided like the deep-sea angler. Ensure capital expenditures can bring your company fast, profitable returns. Would a digital output device make you more competitive than another 40? press? Could the purchase of new bindery equipment attract more customers than another press?
Once you’ve done what you can to optimize cash flow, you can start considering M&A. A merger can be attractive during tough times. This is especially true in the case of “vertical mergers,” where the two companies coming together collectively move up the value chain (for example, a digital printer merging with an integrated marketing firm, or a wide-format shop with an installation/finishing operation).
For both mergers and acquisitions, making a deal holds certain requirements. However, in bad times, poor decisions can sink your ship. Evaluation should thus be undertaken with vigor.