How to execute the perfect M&A strategy amid the current economic climate

How to execute the perfect M&A strategy amid the current economic climate 

Mergers and acquisitions are expected to see a surge in the next five years, as an aging population of business owners focus on future planning. Tepid post-pandemic growth, cost inflation continued Brexit consequences, even Trump 2.0 have exposed the dependencies and weaknesses of many businesses, prompting them to diversify and expand into new markets, or acquire new expertise to reduce exposure. Others are looking to sell up and move on. 

Many companies are in dire need of additional capital amid rising costs and poor market performance. New ownership could be the most straightforward way to stabilise their business. Plimsoll's latest analysis of over 1800 UK markets has shown that 1 in 4 UK businesses are in financial trouble. These factors suggest that the conditions are ripe for a wave of consolidation, regardless of the market or of a company’s expertise within it. 

However, the key challenge for most companies is how to identify the right acquisition targets. Plimsoll can assist in this process by using a straightforward set of steps developed over many years of conducting industry analysis. 

Step 1 – Decide your strategic objective for buying another company 

The first step is to determine the objective of the acquisition, as there are several reasons why a company may consider it. Examples include moving into a new market, acquiring distressed competitors, and buying in new products, suppliers, customers, or expertise in a new field. Identifying the reason behind the acquisition helps assess alternative options, such as starting a new business or expanding into new areas. 

Step 2 – Identify your M&A criteria 

Next, companies should identify their criteria, including an overall budget, geographical location, future potential, and whether to buy a distressed business cheaply or pay a premium for a financially secure option. It is essential to avoid being too specific during this stage to avoid missing out on potential targets. 

Step 3 – Whittle down your list of potential targets to a “shopping list” 

Once the criteria are in place, additional research is necessary to find companies that meet non-financial elements such as current contracts, customer base, patents, product sets, expertise, skills, and supply and value chains. This process allows companies to eliminate targets early and save time and effort. 

Step 4 – Score your shopping list 

After compiling a list of potential targets, companies must filter the results and score their options based on the best strategic and cultural fit, financial viability, potential, and regional criteria. A final acquisition shopping list should include no more than 20 companies. 

Step 5 – Choose your best option and make an approach 

Once the shortlist is final, companies can initiate the formal approach process and communicate their plans to other stakeholders in the business. Plimsoll can help by providing financial analysis and acquisition-based intelligence,  that significantly reduces the initial phase of searching and filtering the best options. 

Plimsoll has analysed some of the most prominent names in corporate Britain since 1987 and helped companies of all sizes and industries to find their own acquisition opportunities. To get started with Plimsoll, companies can call the dedicated team on 01642 626400 or email sales@plimsoll.co.uk to request a free, risk-free assessment of their criteria. 

Alternatively, click here to learn more about the Plimsoll Acquisition Finder Service.