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.

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“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.

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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.

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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.

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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.

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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.

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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

Happy New Year! We are excited to announce the 2017 webinar schedule and invite you to join us this year for these exciting events.

For over 20 years we have helped companies grow and educated business leaders on strategic growth through mergers and acquisitions. Each webinar is led by a seasoned M&A professional providing practical tools and tactics to accelerate your company’s growth. You can watch individual webinars or attend the entire program to earn the M&A U™ webinar certificate.

2017 Webinar Schedule

* Topics and dates subject to change
Photo Credit: Barn Images

The Street interviewed Capstone CEO David Braun for the article “Hollywood Reporter-Billboard Media Likes Sound of SpinMedia’s Music Brands.”

In the article David Braun analyzes the deal’s strategic rationale and discusses how traditional media businesses can continue to grow amidst a changing environment. As print media declines and digital media consumption rises, traditional publishing and communication companies must find new ways to stay relevant, capture market share and most importantly revenue.

Read the full article on The Street here: Hollywood Reporter-Billboard Media Likes Sound of SpinMedia’s Music Brands.”

When you think growing your business in 2017, you probably picture hiring more sales people, opening a new branch, developing additional products or acquiring state-of-the-art technology. Today I want to introduce a new concept for consideration: growing by exiting a business. Before you immediately dismiss the idea, take a moment to challenge your assumptions about company growth and allow yourself to be open to a new perspective. The reality is in some cases exiting may be the best path for growing your company.

Here are three ways exiting can help you grow.

  1. Get Focused – By exiting non-core business lines you can be focus on what you’re really good at. Take P&G for example. Over the last few years the company has adopted a strategic focus and shed over 105 brands in order to focus on 10 fast-growing categories. Shedding these non-core business lines will help P&G become more profitable. You may have some business lines you want to divest so that you can refocus your strategy and resources on what you truly excel at.
  2. Avoid Losses – If a part of your business is no longer profitable, you should evaluate whether or not you should keep going. Maintaining a business simply because you’ve always done so is not a good reason. The world changes and it may be that your customers no longer have a need for this product. For example, it would be crazy to continue manufacturing VCRs in today’s world.
  3. Grow Your Bottom Line – While overall sales or number of customers may shrink if you exit a market, your overall profit may grow. We once worked with an American manufacturer who made millions of die-casting products for various industrial customers. Unfortunately, many of their customers were purchasing cheaper products from China. Faced with this competition, our client decided to reinvent themselves into a maker of specialty components for the aerospace industry. They sold their old equipment and purchased the latest technology. As a result, their customer base shrunk tremendously, but profit rose.

When we hear the word “growth,” we automatically think about “more,” “bigger,” “expanding” not “less,” “smaller” or “shrinking.” While many would never consider exiting a business in order to grow, I encourage you to consider it as you develop your strategic growth plan.

Learn more about growing your business in our webinar 5 Options for Growth.

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2016 continued be a strategic, rather than a financial buyer’s market and strategic buyers deployed large cash reserves to pursue growth through M&A. Unlike financial buyers, which typically look for a three to five years return on investment, strategic buyers can afford to pay more due to their long-term focus.

The middle market has been eager to use M&A as a viable tool for growth. Despite a challenging economic environment, activity in the middle market remained stable in 2016, dropping only 3.5% in 3Q 2016.

As we close out 2016 and look forward to 2017, here is a roundup of the most popular posts of the year from the Successful Acquisitions blog.

  1. The Most Important Thing about M&A According to Warren Buffett
  2. 10 Signs You Should Walk Away from a Deal
  3. M&A Activity after the U.S. Election: Analysis and Outlook
  4. 7 Strategic Questions to Ask Before Pursuing Mergers & Acquisitions – New Webinar
  5. How to Avoid Irrational Decision-Making in M&A
  6. 5 Tips for Taking a Strategic Approach to M&A in 2016
  7. Is Middle Market M&A on the Rebound?
  8. Growth Through Acquisition – Exit Readiness Podcast Interview
  9. How to Break Bad News without Sinking Your Acquisition
  10. What Is Happening with Valuation Multiples Today?

Thank you for reading and we will see you all in 2017.

Photo Credit: Barn Images

2016 has been a year of surprises with the U.K. voting to leave the European Union, fears over China’s economic slowdown, oil price slumps, and Donald Trump winning the U.S. presidential election. Despite these shocks to the market, 2016 will likely be the third best year for global mergers and acquisitions in the past 10 years and dealmakers predict that 2017 will be even stronger.

2017 Outlook

There are many factors that may contribute to robust M&A activity next year. Capital remains available and cheap and in the latest Livingston Survey from the Federal Reserve Bank of Philadelphia, economic forecasters have strengthened their outlook for the U.S. economic environment and their predictions for stock prices. The possibility of tax reform under the new presidential administration may also boost M&A activity. Most importantly, CEOs remain confident and willing to execute deals to grow their businesses.

Geopolitical upsets like Brexit and the outcome of the U.S. presidential elections may dampen activity as some may wait to see how these situations will affect their business and the marketplace. Changes in the interest rates may also reduce activity in some sectors, but create new opportunities in others such as financial services.

Top Sectors for 2017

Strong activity is expected in the following sectors:

  • Consumer product
  • Telecommunications, Media and Technology (TMT)
  • Industrials
  • Healthcare
  • Financial services
  • Oil and gas

What Do You Think?

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Are you exploring all your options for growth? When you think about a growing your credit union or CUSO through a “merger” strategy, you may be tempted to focus on consolidation alone. While combining two credit unions can be a pathway to growth, it is important to recognize it is just one of a number of options available to you. Consolidation may not be the best solution for your organization and may not help you add the value you had hope for.

In a CU Insight article, Kirk Drake, CEO of Ongoing Operations, a credit union service organization, and John Dearing, Managing Director of Capstone, discuss the growth options available to credit unions and CUSOs and how to use strategic mergers and acquisitions to maximize your growth potential.

Read the article on CU Insight.

One month after the U.S. presidential election, there is still a great deal of speculation about what will happen in the M&A market over the next year. Looking back at M&A activity so far this year, compared to 2015 activity, fewer and smaller deals were announced. During the first 9 months of 2016, M&A value dropped by 30% to $1.07 trillion and average deal size dropped by 22% to $132 million. This year we have seen fewer huge, double-digit billion dollar transactions which dominated the marketplace in 2015.

Part of the reason is that historically, leading up to a presidential election where there will be a change of administration, there’s been hesitation in the marketplace. Business people don’t like uncertainty and as a result are less likely to take action.

The outcome of the election caught a number of people off guard, and we have already seen some impact in terms of some deals that are getting re-priced, accelerated or delayed in response. For example, in the healthcare space there’s uncertainty about how the Affordable Care Act will be impacted and we’re seeing a pullback in deals that touch upon it.

Despite this, over the next 24 months we expect an uptick in M&A. We’re already seeing a strong pipeline of deal activity as a result of the election being behind us. The business climate is still somewhat unsettled, but there’s a sense of relief the election is over.

Photo Credit: D Williams via Flickr public domain