A Buyer’s Market in M&A

In every crisis there are winners as well as losers. Today companies seeking growth through acquisition can pick up bargains — if they have the cash. Small, over-leveraged companies are choosing to sell rather than go to the wall. As for the publicly traded corporations, they are under pressure from shareholders to get out of business units that don’t make business sense. So there may be some attractive divisions up for grabs — the unwanted stepchildren of major corporations. From the buyer’s perspective the key is to come to market with a strong balance sheet. This isn’t the time for highly leveraged acquisitions. Cash is king and the buyer with dollars to spend can not only pay less but also command favorable terms like a quicker closer or more reps and warranties. I talk more about this in my post The Return of Simplicity in M&A.

That doesn’t mean we should expect a huge volume of mergers and acquisitions right now. There will be a slowdown in the coming months while the current financial turbulence plays out. But watch the beginning of 2009. I have clients right now engaged in intensive planning for acquisitions early in the New Year.

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