Growth by Acquisition: It Works Both Ways

For a long time now, the U.S. Army has been recruiting volunteers with the slogan, "Army Strong." It’s a message to our young men and women that they can grow in strength, skill, and character if they’re willing to become part of something larger than themselves. As the Army gets bigger and better, so do they.

When we speak of M&As in the printing and packaging industry, the thinking behind "Army Strong" should remind us that growth by acquisition can be a strategy for sellers, as well as for buyers. Selling a company as a going concern to a carefully vetted purchaser lets the seller maintain its identity, expand its capabilities, and broaden its footprint. The opportunity isn’t available to every seller, but for those in the right circumstances, it can be a straight-line path to the next level.

Take a current situation of mine, which involves a fast-growing company whose owner wants the firm to be acquired by a larger counterpart in another region. The owner’s objective is to get wider geographical distribution for his products while retaining his existing factory and workforce. He also wants to be an active part of the senior management team of the company that acquires his business.

Possible? Yes, very much so. This is a highly profitable company, financially healthy and expanding on its own in an attractive niche. It should be an excellent fit for a buyer that wants to capture these assets along with the exposure it will gain for its own business in the seller’s territory.

As noted, we are talking about a sale as a going concern here—not a tuck-in, in which only the seller’s accounts would be absorbed. This means that in the type of transaction this company aspires to, the pool of eligible acquirers will be smaller than it would be if the deal were structured as a tuck-in or marketed to non-strategic private equity firms. In this case, we’ve identified a large pool of potential strategic investors who would view this firm as very attractive.