Capstone announced today that Green Dot, a telecommunications provider headquartered in Trinidad and Tobago, has received regulatory approval to sell a 51% stake to One Caribbean Media. The acquisition allows Green Dot to continue reaching new markets and rapidly growing its subscriber base.

Capstone Strategic, Inc. (Capstone) announced today that Green Dot, Ltd. (Green Dot) has completed the sale of a 51% stake to One Caribbean Media Limited (OCM).

The transaction between Green Dot and OCM was first announced in August 2016 and closed after receiving expected regulatory approval. Capstone advised Green Dot on the agreement including facilitating discussions between Green Dot and OCM and providing negotiations assistance.

Green Dot is the leading ISP provider and third largest provider of digital television services in Trinidad and Tobago. Founded in 2004, the company provides wireless ISP and subscription TV services to residential and business customers in Trinidad and Tobago, Grenada, and Suriname. OCM is a regional media group quoted on the stock exchanges of Trinidad and Tobago and Barbados under the ticker symbol OCM.

The acquisition combines Green Dot’s leading telecommunication services and strong subscriber base with OCM’s resources to lead to a mutually beneficial deal.

CEO Ketan Patel will continue leading Green Dot and will leverage OCM’s marketing expertise to further expand into other countries in the Caribbean region. OCM’s investment is part of the firm’s diversification strategy.

“Our move to join forces with OCM will allow us to accelerate our mission to expand and grow in the Caribbean. Capstone served as an important advisor throughout the acquisition process and their expertise has been extremely helpful in bringing this deal to a successful close,” said Ketan Patel, CEO of Green Dot.

“We are delighted to see the acquisition between Green Dot and OCM come to fruition so that the two companies can continue providing superior internet, telecommunication, and entertainment services in the Caribbean. It has been a pleasure working with them and we are excited for their future growth,” said David Braun, CEO of Capstone.

About Capstone Strategic, Inc.

Capstone Strategic, Inc. is a management consulting firm located outside of Washington DC specializing in corporate growth strategies, primarily mergers and acquisitions for the middle market. Founded in 1995 by CEO David Braun, Capstone has facilitated over $1 billion of successful transactions in a wide variety of manufacturing and service industries. Capstone utilizes a proprietary process, “The Roadmap to Acquisitions,” to provide tailored services to clients in a broad range of domestic and international markets. Visit the Capstone website at http://www.CapstoneStrategic.com.

About Green Dot

Green Dot, Ltd. was founded in 2004 and has since become the leading innovator in telecommunication solutions. Headquartered in Port of Spain, Trinidad and Tobago, the company offers wireless ISP and subscription TV services to residential and business customers in the Caribbean region. The Green Dot network has the capacity and capabilities to support today’s mission critical applications such as Virtual Private Networks, Voice and Video over IP, as well as bandwidth intensive applications such as Enterprise Resource Planning, Customer Relationship Management, and other Business to Business functions. Green Dot is committed to delivering world class solutions backed by unmatched customer support system. Visit the Green Dot website at: http://www.gd.tt.

 

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From the somewhat plausible to the downright outrageous, rumors abound whenever a transaction is announced. While some rumors may be innocuous, unfortunately others may have lasting, damaging effects on your company and employee morale so it’s important to quickly put a stop to them.

Here are three practical steps to kill gossip and reduce confusion.

1. Communicate Early

Of course the best way to stop rumors from spreading is to prevent them in the first place. On day one of the acquisition, publish and distribute your 100-Day Plan, your integration program for the newly merged company, so that employees understand what to expect including changes to benefits, payroll, and operations. No one likes being left in the dark and in an information vacuum people will likely imagine the worst. You don’t have to share every last detail of the deal, but you should let employees how they will be affected by the transaction.

2. Set up an Anonymous Hotline

A toll-free hotline or an online or physical question box, is a great way for employees to anonymously voice their frustrations, concerns, and questions without fear of repercussions. You’ll also be able to answer relevant questions rather than allowing employees to fill in the blanks on their own or through the grapevine.

3. Be Honest

Don’t lie. This simple principle most of us learn as children is vital to establishing and maintaining trust in a company. The truth will come out eventually and the consequences of lying will be worse than if you had told the truth in the first place. Although it might be bad news, it’s best to rip the band aid off quickly. We once had a buyer tell an entire plant they were losing their jobs because the buyer was shutting the factory down as a result of the acquisition. Of course people were upset, but they respect our client’s honesty and had ample time to plan next steps in their career rather than being blindsided.

Change is hard, but by communicating early, addressing questions, and remaining honest, you can prevent rumors from spreading after an acquisition.

For more advice on integration, download our special report “Planning for Integration – Begin at the Beginning.”

Price is often the number one focus in mergers and acquisitions and everyone is eager to get down to the numbers.

However, as you might expect, buyers and sellers have very different expectations on price, which can lead to friction between the two parties. On the one hand, most sellers plan to offer their business to the highest bidder while buyers are looking for a cheap deal. Given the opposite viewpoints, it can be difficult to broach the issue of price and come to an agreement.

The best way to bridge this gap is to make sure you don’t focus on price as a primary driver for the acquisition. Before you even begin talking about dollars and cents, you should make sure the deal makes sense. Initially you should communicate the strategic value of why an acquisition between your two companies makes sense. This is a critical step, especially when approaching owners of not-for-sale companies. Aligning your vision with the owner’s vision prior to even discussion the details of a potential deal (such as price or deal structure) is paramount.

Once you’ve achieved strategic alignment and you begin negotiations, you must think about what you can offer an owner in addition to price that will convince him or her to sell to you. Money is a strong motivator, but it’s not the only motivator. As a buyer, you must identify the nonfinancial factors in addition to price that will motivate an owner to sell. Understanding the owner’s psychology is key to building a mutually beneficial deal.

Owners do sell their businesses for many reasons other than high price including:

  • Age – They may want to retire and are burned out
  • Family – They may have no heir to take over the business or their spouse may be nagging them to retire
  • Insecurity and risk – Selling now while the business is performing well may mitigate their risk
  • Excitement – They simply are excited to be considered for acquisition, because of the prestige or a possible financial windfall

Achieving strategic alignment before discussing price as well as identifying the issues that matter the most to the owner can help you bridge the gap between your number and theirs. When you approach owners with a complete understanding of all the different factors that are important to them – age, community, family, financial, and risk – you increase your chances of building a successful acquisition.

Many are convinced that the buyer with the most money always wins the deal. Although many acquisitions by financial acquirers and strategic buyers are driven by the desire to grow revenue and the company’s bottom line, it is possible to win an acquisition without offering the most amount of money.

A successful acquisition is about finding the right equation for the seller, which includes, of course, financial compensation, as well as many other non-financial aspects including prestige, value, excitement, or strategic fit.

It can be difficult to visualize this concept, so let’s take a look at a recent example from the news. Amazon announced it would acquire Souq.com a Dubai-based internet retailer. While terms of the deal were not disclosed, Amazon reportedly paid between $650-750 million, beating out a competing offer for $800 million from Emaar Mall. So why would Souq sell to Amazon for a lower price?

From Amazon’s perspective, this deal makes a lot of sense because it will allow Amazon to enter into the Middle East while circumventing regulatory hurdles, the headache of building new infrastructure, and the cost of raising brand awareness. Souq.com is already a very popular in the Middle East where e-commerce is expanding among a growing young, tech-savvy population. Kuwait, Saudi Arabia and the UAE are the top markets for mobile penetration. In addition, Middle Easterners are willing to pay a 50-100% premium for Western products and brands from the US. The Souq acquisition will help with top-line and bottom-line growth.

So what’s in in for Souq? Why agree to a deal for less money?  The answer is Amazon’s experience and reputation. As one of the top global companies, Amazon has a large network, resources, and deep experience with e-commerce. Souq can leverage Amazon’s experience to continue growing.

It is also exciting to be acquired by a well-recognized brand and be a part of Amazon’s team. While we can’t know what the founder of Souq, Ronaldo Mouchawar, was thinking, we can safely assume emotion had some factor in the decision-making. Don’t completely forget about the human factor and emotions when it comes to M&A, especially when dealing with owners and privately-held businesses. In fact, understanding the owners motivations – excitement, family-members in the business, community pride, desire to leave a lasting legacy, risk aversion, or financial – is key to developing the right equation to persuade him or her to sell.

Photo Credit: Mike Mozart via Flickr cc

Think you can only acquire a for-sale company? Think again. Although it may seem impossible to buy a “not-for-sale” company, a company that is “not-for-sale” simply means it is not actively thinking about selling. However if the owner receives a compelling offer, they might change their mind. Here are four reasons why a not-for-sale acquisition can be better than a for-sale opportunity.

  1. Be proactive: Rather than reacting to whatever deals happen to come your way, you approach the prospects that offer the best fit with your company. This puts you in a better position for finding quality prospects that are aligned with your company.
  2. Maintain stealth in the marketplace: You can keep your acquisition search hidden from competitors. You also will gain access to acquisitions none of your competitors are aware of because the prospects you are looking at are not advertised. Another bonus: you can avoid auctions, which often drive up price,
  3. Maximize your options: If you only pursue for-sale acquisitions, you are ignoring a large number of profitable, viable acquisition prospects.
  4. Pick Winners: Companies that are not for sale are usually in good shape. Management teams are actively engaged in a successful business and are not looking for an exit. They may be happy to stay on (if you want them to) once the acquisition is complete.

As you begin your search for acquisition prospects, I encourage you to consider “not-for-sale” companies in addition to for-sale opportunities in order to increase your chances for a successful acquisition.

*A version of this post was originally published on AMA Playbook.

M&A activity has been trending upward in the last year and half to two years. There was a particular uplift in 2015 which reached the record-breaking value of $4.3 trillion worldwide. Some of that was fear-based because of what was going to happen with capital gain rates so many deals were completed in the latter half of 2015. Although activity dropped in 2016, it was still one of the most active years in the past ten years.

So far in 2017, average deal size is up and the number of deals is down for worldwide M&A activity. According to Reuters data, global M&A value reached $778 billion, increasing 12% while the number of deals decreased reached 11,441, a 9% decrease when compared to 1Q 2016. In the US deal value rose by 5% and the number of deals rose by 20%.

Middle Market Opportunity

Globally, bigger deals are back in vogue, and M&A is still being driven by strategic buyers rather than financial buyers. Large companies now have more confidence in deploying cash to execute these large transactions. However, not all of these large acquisitions will stick. There may be some “corporate indigestion” after taking such large bites and there will likely be some seeds and bones they will end up having to spit out in the form of spinoffs or divestments. That creates challenges and opportunities for the middle market companies who have the chance to fill some of those gaps.

M&A Outlook

In general from everything we are seeing right now, we expect activity will be robust for the next 12 months through the end of the 1Q 2018 , especially with the potential for tax reform related to repatriation of foreign cash. Leaders should anticipate a wave of activity from competitors, customers and suppliers and be prepared to handle changing industry dynamics. Strategic buyers should expect more competition from private equity groups as interest rates rise and PE groups become more active.

Click on the infographic for a closer look at M&A in the first quarter of 2017.

M&A Update 1Q 2017 - Capstone Strategic

Feature Photo Credit: Barn Images, Infographic by Capstone Strategic, Inc.

Owners are usually skeptical or defensive when asked about selling their “not-for-sale” company. In fact, many will hang up or refuse to consider your offer. If you do manage to break through and get the owner to agree to a first meeting, your job is to put them at ease, dissuade fears and communicate the strategic value of an acquisition. A positive first meeting is essential to executing a successful deal.

One of the best ways to make an owner comfortable is to meet on their terms. Let the owner pick the restaurant and meeting location. This has a number of benefits: the owner will naturally be more comfortable and open to discussions in a familiar settings and you will also learn a great deal about the owner and their personality.

Prior to the meeting make sure you do your homework and have an understanding of the seller as both a business owner and as a person so that you can discuss their hobbies, family or any other topics they enjoy during the first meeting.

Most importantly, you should behave as if you were their guest by being respectful and listening. You do not want to come across as a hostile acquirer who wants to take over their business, but rather a potential partner that will bring mutual success to both companies.

Learn more about contacting owners in our webinar “The First Date”: Contacting Owners and Successful First Meetings on April 20.

After this webinar you will be able to:

  • Explain what typically motivates owners to sell
  • Describe effective contact strategies for getting and keeping owners on the phone
  • Detail how to use market and prospect research to gain credibility with an owner
  • Outline steps for a successful first face-to-face visit with an owner
  • Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect

“The First Date”: Contacting Owners and Successful First Meeting

Date: Thursday, April 20, 2017

Time: 1:00 PM – 2:00 PM EST

CPE credit is available.

You don’t have to “go big or go home” to successfully grow your company through M&A. A small, well-executed acquisition that targets a specific need can sometimes be more powerful than a multi-billion dollar consolidation. Let’s take a look at a recent example from the news.

Earlier this month, Conagra announced it would acquire Thanasi Foods out of Boulder, Colorado. Founded in 2003 by Justin “Duke” Havlick, Thanasi is a privately held company with less than $20 million in revenue and sells two products: Duke’s meat snacks and Bigs sunflower and pumpkin seeds.

On the other hand, Conagra is an $11.6 billion company with an established product portfolio which includes brands such as Marie Callender’s and Healthy Choice. So why is Conagra purchasing such a small acquisition? Conagra needs more SKUs, especially value added or “premium” products that will deepen its relationship with customers like Walmart, which is Conagra’s top customer.

Although Thanasi is a small company, its products already have some traction and customer approval in the marketplace. Duke’s and Bigs are sold in 45,000 retail locations and are in fast-growing segments. Depending on how you look at it, Duke’s and Bigs is a compliment or competitor to Conagra’s Slim Jims and David-branded seeds. Essentially Conagra is purchasing a form of proven R&D to run through their pipeline of customers on a larger scale.

Acquisitions don’t have to be huge to be significant. Especially in the middle market, a carefully planned, small, strategic deal can exponentially grow your business and help you reach your goals. Meaningful transactions are those that help your company become increasingly focused and effective, so don’t get too caught up in the numbers.

Photo Credit: Graham Cook via Flickr cc

“We did an acquisition about 15 years ago. It did not go well…I guess you could say we are still ‘recovering,’ the CEO of a family-owned business recently shared with me during a meeting.

She went on to explain there were a number of integration issues and other challenges that cropped up post-closing that the company was not prepared to handle. From payroll issues to disgruntled employees to operational challenges – the experience was “traumatic,” for the organization according to the CEO.

Fortunately, the company is in a better place today and is ready to explore new ways to grow. While leadership recognizes the potential of a strategic acquisition, because of their previous experience, they are, understandably, hesitant.

It’s not uncommon to have this reaction. But just because an acquisition didn’t work in the past, it doesn’t mean you have to abandon M&A as a tool for growth. You can learn from what went wrong last time and be successful when executing future deals.

There are many reasons deals fail from culture clashes, hidden liabilities, poor planning, or simply inadequate of expertise, but these issues point to one overarching reason for acquisition failure – lack of strategy. Alarmingly, many companies take on a reactive approach to acquisitions, buying whatever company comes their way without first developing a strategic plan. Not having a plan is a surefire way to fail.

In the case of our family-owned business, they decided to take on a strategic approach to M&A this time around. Unlike last time, where they adopted a “plan as you” approach to M&A, they dedicated serious resources to establishing a strategic plan for acquisition prior to even looking at companies. This included identifying potential integration challenges and developing a 100-day post-closing plan long before the deal closed to avoid the same issues as last time. With a firm foundation the company was able to identify the right opportunities for growth and execute a successful transaction.

If you are still suffering from the results of a failed acquisition, I encourage you to adopt a strategic approach right now. Gather your team together to review your growth options in light of your overall strategic vision. Then, you can determine your next steps whether its organic growth, external growth, minimizing costs, exiting a business, or doing nothing. With a strategy in place, you will avoid many pitfalls and maximize your chances for success.

It seems like 2017 will be a strong year for acquisitions. A new report highlights a number of factors that could drive activity this year including the record levels of cash held by private equity firms and a favorable lending environment for borrowers.

Potential changes to U.S. tax policy under the new administration could reduce the corporate tax rate and encourage companies to repatriate offshore cash to invest in acquisitions.

2016 was a year full of uncertainty, from Brexit to the U.S. presidential elections, but as the economic and political landscape stabilizes, business leaders are regaining their confidence. 80% of executives surveyed predict M&A activity will increase in 2017. These market conditions may be the right recipe for increased acquisitions, especially for companies facing poor organic growth prospects.

In the first quarter alone, a number of significant transactions have been announced including the owner of Burger King and Tim Horton’s acquiring Popeyes, Mars acquiring pet hospital company VCA, and Intel pushing into the self-driving car space by purchasing Mobileye. These deals will likely spur additional acquisitions as key players react to changing industry dynamics and competition.

While we don’t know if M&A in 2017 will match 2015’s record level, we can certainly expect an uptick in activity for the remainder of the year.

Photo credit: Igor Trepeshchenok / Barn Images 

3M, the maker of Post-it, will acquire Scott Safety from Johnson Controls for $2 billion to build up its safety division. This is the second largest acquisition for 3M after its purchase of Capital Safety, a maker of fall protection equipment such as harnesses, lanyards, and self-retracting lifelines, from KKR & Co. for $2.5 billion in 2015.

Scott Safety’s products include respiratory-protection products, thermal-imaging devices, and other products for firefighters and industrial workers. The company will become a part of 3M’s safety division, which accounts for 18% of the company’s sales in 2016 and is the second largest division.

3M is using acquisitions to boost slow growth in the US and to combat industry challenges in the consumer and electronic sector. In 2016, 3M executed a number of acquisitions and divestments as part of its realignment strategy. The company sold its temporary protective films business, safety prescription eyewear business, and pressurized polyurethane foam adhesives business. 3M also purchased Semfinder, a medical coding technology company.

Here are two lessons for leaders who are thinking about company growth.

1. Acquisitions can jumpstart growth.

When organic growth options such as, opening a new store or adding new products, fail to grow revenue significantly, it may be time to look at external growth. Strategic leaders evaluate shifting industry dynamics to anticipate future demand and then use acquisitions to reposition their companies to capture a share of the high-growth market. When completed, the acquisition of Scott Safety will add 1,500 employees, $570 million in revenue, and a slew of products immediately to 3M’s safety division.

2. Acquisition isn’t just about getting bigger.

Acquisition is truly about recalibrating your business and focusing on strategy. Although 3M is acquiring Scott Safety, the company also divested of a number of businesses in 2016 and is paring down from 40 business units to 25.

On the other hand, the seller, Johnson Control is also realigning their business with this divestment. “Consistent with our priority to focus the portfolio on our two core platforms of Buildings and Energy, we continue to execute on our strategic plan.” said Johnson Controls Chairman and CEO Alex Molinaroli.

Photo Credit: Dean Hochman via Flickr cc

There’s a myth that acquisitions are only executed by huge, publicly-traded, Fortune 500 companies, but that’s simply not the true. In reality, there are many acquisitions conducted by small and middle market firms that are private transactions and are not reported to the media.

There are many reasons to consider acquisitions, regardless of the size of your business. A smaller, highly focused acquisition can grow your company and be incredibly profitable. In fact, small transactions allow you to execute your strategy covertly and avoid alerting your competition to your growth strategy. With a small, strategic acquisition there is less of a risk of integration issues and acquisition failure because the deal is not transformative for the organization. At the same time, a small, strategic acquisition can fulfill a targeted growth need and positively impact a company’s long-term growth.

Another reason people don’t consider acquisitions is because they think they are too expensive. While acquisitions do require a significant amount of financial resources to execute, the cost of organic growth or doing nothing may be higher than the cost of M&A. When looking at the bigger picture, it may be more expensive to develop a new product on your own or take too much time. Companies often use acquisitions to move quickly and implement a ready-made solution. If you are concerned about cost, keep in mind there are ways to mitigate the price of a deal. Only you can determine if acquiring or building your own solution is best, but you should consider both options simultaneously.

Whether or not you decide to grow through external or organic growth, you should consider both as tools, regardless of the size of your company. For every company, unintentionally falling into the trap of doing nothing is dangerous. Innovation, either from external growth or through in-house development, is key to long-term success. Think about companies that lost their edge do to failure to innovate. Blockbuster didn’t adapt from DVD to streaming and lost out to Netflix and Redbox and the once dominant BlackBerry, which failed to compete with iPhone. The cost of unintentionally doing nothing can mean your services and products become obsolete, so make sure you consider your next steps with the future in mind.

Photo credit: Barnimages.com via Flickr cc

You do not need an M&A advisor to pursue acquisitions. You might think I’m crazy for saying this, after all, we are M&A advisors, but the truth is you can pursue acquisitions on your own. In fact, for those of you who are so inclined to take the do-it-yourself approach, I lay out a step-by-step process, the Roadmap to Acquisitions, in my book Successful Acquisitions and regularly provide tips and tricks for free on this blog and through my firm’s educational resource M&A U™.

That being said, there are many benefits to bringing on an experienced M&A advisor. Think of it this way: Technically, you do not need a CPA to do your taxes. Depending on your situation, you may be able to go through the paperwork, file your taxes on your own and hope you don’t get audited. Or, you could consult an experienced professional and rest easy, knowing the job will be done right.

The advantage of an M&A advisor is having an expert by your side for every step in the process. Unfortunately, especially if your company has never done an acquisition, it’s difficult to tell if you are missing any important steps until it’s too late. An experienced advisor will help you navigate the process and avoid making mistakes.

Here are five advantages of using a third party:

  1. Objective outsider to help evaluate decisions – Acquisitions can be emotional and as a third party, an M&A advisor can help facilitate discussions and resolve conflicting perspectives.
  2. Experienced market and company research team – In addition to accessing to multiple databases of industry information, a third party can speak directly to key industry players without giving away your interest in making an acquisition.
  3. Discreet approach to owners – One of the advantages of privately-held acquisitions is the ability to execute your strategy under the radar. An M&A advisor can approach companies – even competitors – on your behalf without exposing your plans to marketplace.
  4. Maintain negotiation momentum and overcome roadblocks – Negotiating during acquisitions is not about “winning,” it’s about understanding the motivators that will prompt an owner to sell. It takes experience to discover these underlying desires that will help move the deal forward.
  5. Ensure early preparation for success integration – When it comes to integration, experience has taught us that preparation begins very early in the process, well before the deal is consummated. With the help of an advisor, you can address integration issues early so that you successfully weather the challenging first 100 days of integration post-closing.

Does this sound familiar? You want to grow through acquisitions, but there are no good companies to acquire. While it may seem like there are absolutely zero acquisition prospects, usually that is not the case.

Many companies struggle to find acquisition prospects because they are focusing on only on industry partners, suppliers, or competitors they already have a relationship with. We call these companies the “usual suspects.” There’s nothing wrong with looking at the “usual suspects” for acquisition opportunities, but if you find you are hearing the same company names over and over again without getting any results, it may be time to try a new approach.

Here are four more ways to find quality acquisition prospects in addition the “usual suspects”:

  1. Market Research – In researching the market you will naturally uncover a few potential acquisition prospects. You will also have the advantage of gaining a deeper understanding of the market which will help you select the best companies to acquire, evaluate potential acquisition candidates, and negotiate with owners.
  2. Trade Shows / Associations – Both are an excellent source for finding many companies in your desired industry in a short amount of time. Walk the floor of a trade show and you’ll see dozens of companies all in one location and many trade associations also member companies listed on their website.
  3. Internal Input – Use the resources you already have. Your sales team is filled with folks who have their ear to the ground and are up-to-date on key players and new developments in the industry.
  4. For-sale Companies – Looking at for-sale companies is never a bad place to start your search. Just make sure you don’t limit yourself by only considering these opportunities. Including not-for-sale companies in your search will increase your chances for a successful acquisition. Remember, every company is for sale, for the right equation.

For more tips on finding companies to acquire join our webinar Building a Robust Pipeline of Acquisition Prospects on March 23.

After this webinar you will be able to:

  • Approach the search for the right acquisition prospect systematically
  • Understand effective research methods for identifying prospects
  • Develop criteria for your ideal acquisition prospect
  • Use tools for objective decision-making during the acquisition process

Building a Robust Pipeline of Acquisition Prospects

Date: Thursday, March 23, 2017

Time: 1:00 PM – 2:00 PM EST

CPE credit is available.

Photo Credit: patchattack via Flickr cc

Not finding the right company to acquire is the top challenge for middle market companies seeking to grow through mergers and acquisitions. According to Capstone’s survey of middle market executives, 28% noted lack of suitable companies as the strongest reason for not considering acquisitions as a tool for growth.

Finding the right company to acquire is critical to the success of a deal, especially for strategic acquirers who plan to hold onto the newly acquired business long-term.

The lack of targets may be because most leaders are only focusing on for-sale companies. Many wrongly assume that if an owner is not actively seeking a buyer, a there is no chance for a deal. This is simply not the case. Once you begin to consider not-for-sale acquisitions, the universe of options expands.

Pursuing not for-sale acquisitions allows you to take charge of your acquisition strategy and seek out the best companies to acquire rather than accepting whatever opportunity happens to come your way.

For many I realize the idea of pursuing not-for-sale deals can be intimidating, and many assume that if an owner is not actively selling their company that there is no chance for acquisition. This is simply not true. While searching for and approaching companies that aren’t seeking buyers requires a different approach, and more effort, than reacting to whatever happens to be for sale, there are some tricks to approaching these owners.

Finding an Owner’s “Hot Buttons”

One of these best practices is to find the owner’s “hot buttons” to determine what the right equation will be for them to consider selling. A “hot button” is any issue an owner would insist on addressing if they were to sell the company. Price might be one such “hot button” but it’s unlikely to be the only one. The owner may love his or her work, in which holding a position after the acquisition would be a priority. There may be a succession issue if the owner has family members in the company they want to take care of. The owner could have longstanding ties to the community—or may even be the biggest employer in town—and would want to ensure the business stays in the area.

Being informed about these “hot button” issues, and handling them sensitively, opens up the whole field of so-called “not-for-sale” companies.  Now, as you develop your acquisition strategy, you have far more choices, and much better chance of finding the company that truly matches your over-riding strategic goal.

Because approaching “not-for-sale” owners takes great skill, it often it makes sense to hire a third party expert who has experience in this work and is not perceived as any kind of competitive threat by the owner.  Your acquisition advisor can also help you tease out the precise equation that would prompt the owner to sell.

For more insights on middle market M&A, download our report State of Middle Market M&A 2017.

Photo credit: Kate Ter Haar via Flickr cc

Capstone Strategic’s survey of middle market executives shows most see the same (43%) or growing (31%) M&A activity in their industry. 47% are pursuing M&A in order to access new markets.

Capstone Strategic, the leading M&A advisory firm for the middle market, surveyed middle market executives from multiple industries on their growth and M&A experience in 2016 and their outlook for 2017. The survey was conducted in December 2016 and followed previous annual surveys of the middle market.

M&A activity across the board is mostly seen as the same (43%) or growing (31%).

Looking forward, our respondents are evenly split on whether or not they will pursue M&A in 2017. 35% are less than 50% likely to execute acquisitions and 35% are more than 50% likely. The top driver for pursuing M&A this year is access to new markets (47%).

As for obstacles to M&A, time and attention demanded by the process is the top barrier to pursuing acquisitions in 2017 (25%) while the most common reason for not considering M&A as a tool for growth is lack of appropriate target companies (28%).

The overall growth picture is improving. Those reporting modest growth rose from 58% in 2015 to 67% in 2016 and those reporting high growth grew from 11% in 2015 to 13% in 2016. Those reporting contraction shrunk from 9% in 2015 to 5% in 2016.

The business environment is seen by most in a positive light, with the majority reporting the same (50%) or an improved (35%) environment for growth. Compared to 2015, fewer executives saw a worsening environment for growth (8% compared to 13%).

Capstone’s CEO David Braun said: “The survey confirmed that 2016 remained an active year for middle market mergers and acquisitions and looking ahead, we believe we’ll see begin to see a renewed interest in M&A activity due to pent up demand and supply in the marketplace. 2017 presents a unique opportunity for companies that decide to execute strategic acquisitions.”

The full survey, State of Middle Market M&A 2017, can be viewed by clicking here.

 Feature Photo credit: dan Chmill via Flickr cc

Should your credit union acquire a bank? If you are looking for new ways to grow, acquiring a bank may be an option for your credit union.

Capstone is excited to host a webinar attorney Michael Bell, who pioneered this new approach and continues to help credit unions acquire banks. The webinar will cover the strategy and mechanics behind a credit union-bank merger as well as challenges and proactive growth opportunities for credit unions.

Seizing Your Opportunity for Growth: Exploring the  Credit Union–Bank Merger Trend with Expert Michael Bell

Date: March 9, 2017

Time: 1:00 PM / 12:00 PM EST

Michael Bell is an attorney at Howard & Howard and a leading advisor to credit unions and national financial institutions seeking non-organic growth, strategic advice. In 2011, Michael completed the first ever purchase of a bank by a credit union. Michael continues advising credit unions in this area and has completed every credit union purchase of a bank to date. He is a “go-to” legal advisor in this area.

Founded in 1995, Capstone is a leading advisory firm focused on helping companies grow through proactive, strategic growth programs and mergers and acquisitions. As the leaders in strategic mergers and acquisitions for CUSOs, we have helped numerous credit union and CUSO leaders develop, evaluate, and implement initiatives for growth. Learn more at www.CapstoneStrategic.com.

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We usually think acquirers are big, multinational companies that gobble up their smaller competitors. However, that’s not always the case. Hudson’s Bay, which has a market value of $1.5 billion, is interested in acquiring Macy’s, which has a market value of $9.4 billion.

This transaction challenges common perceptions about acquirers and sellers and demonstrates that for the right strategic reasons, acquisition can be used as a growth tool by any company. While a smaller company acquiring a larger one is not the norm, it does happen. And, in this case, Hudson’s Bay could use Macy’s to expand its retail presence in the U.S. with another well-known department store. It would be difficult, if not impossible, for Hudson’s Bay to build up the reputation and name brand of Macy’s organically.

Hudson’s Bay, headquartered in Toronto, is an active acquirer and has a history of success in growing struggling retailers and optimizing value from its real estate. It acquired its affiliate Lord & Taylor in 2012 and Saks’s Fifth Avenue in for $2.4 billion in 2013. One year later, the Manhattan Saks Fifth Avenue store was valued at $3.7 billion. Hudson’s Bay has also made other acquisitions including German retailer Galeria Kaufhof for $2.8 billion in 2015 and Gilt Groupe for $250 million in 2016.

It will be interested to see how the transaction is structured and how Hudson’s Bay plans to tackle the challenges Macy’s is facing. Macy’s, like many traditional retailers, is struggling to keep up with market changes. The store is currently in the process of shutting down 100 stores and is planning to cut 10,000 jobs after facing disappointing fourth quarter sales. Perhaps an acquisition will save Macy’s? Only time will tell.

If you are thinking about growing your business, I encourage you to consider strategic acquisitions. Despite what you may think, there are many more options than just a large company acquiring 100% of a smaller company. I hope the example of Hudson’s Bay and Macy’s helps you gain a better understanding of what options might be available for you.

Learn more! Download the whitepaper Nine Pathways of External Growth.

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Thanks to advances in science and healthcare, people are living longer than ever. As they age, demand for healthcare products and services increases. One of the most significant demographic trends impacting healthcare is the aging baby boomer generation. As about 75 million American baby boomers grow older, demand for healthcare continue to will increase rapidly.

Today, companies are taking note of these market changes and using acquisitions to quickly capitalize on this opportunity for growth.

Just this week eyeglass giants Luxottica and Essilor announced a merger in order to take advantage of ideal market conditions. The acquisition will allow the company to benefit from strong demand in the eyeglass market that is only expected to grow.

In the heart disease sector, medical device companies are also acquiring in order to meet the growing needs of patients. Medtronic acquired HeartWare International for $1.1 billion, Teleflex acquired Vascular Solutions for $1 billion and Edwards Lifesciences acquired Valtech Cardio for $690 million. In this sector there is “huge unmet needs” according to Edwards Lifesciences CEO Michael Mussallem.

The primary driver of these acquisitions is swiftly meeting demand. Rather than waiting to build their own solutions, with acquisitions companies can rapidly take advantage of market conditions today and position themselves for future growth.

The ability to meet future demand is key to the success of any company. Take a look at your own industry and market. Where is demand going?

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Global M&A reached $3.7 trillion in 2016, dropping 16%, and the number of deals increased slightly by 1% when compared to last year. While 2016 did not match 2015’s record-levels, activity was still robust. Compared to 2014, activity increased by 5%.

Activity in the fourth quarter reached $1.2 trillion with 13,504 deals announced, a 50% increase in deal value and 18% increase in the number of deals when compared to 3Q 2016. This year, there were a number of interesting deals to note, including the AT&T’s acquisition of Time Warner transactionVerizon’s deal with Yahoo, and GE Oil and Gas combining with Baker Hughes.

Click on the infographic for a closer look at M&A in 2016.

M&A Update Year End 2016 - Capstone Infographic