for_sale_sign_1When you’re considering growth through acquisition, it may seem obvious to focus on companies that are actively searching for a buyer. In fact, this is the most common procedure, widely advocated by investment bankers. However, it is an approach that will severely limit your chances of finding the right company.

For-sale companies are often “for sale” for a reason.  Whether the reason is financial difficulty or ownership problems, it can make these targets much less attractive.  Also, with for-sale companies, there are often multiple interested parties (including your competitors), allowing the seller to drive up the price.  This can shift the balance of power to the seller.   Finally, the inventory of for-sale companies can dry up quickly, leaving you with too few options and backing you into the corner of trying to make an inappropriate company fit your one chosen need.

At Capstone, we usually guide our clients to focus on “not-for-sale” candidates. When a company is “not-for-sale”, it simply means it isn’t actively seeking a buyer. If through your search and screening process, you discover a company that could be the right fit for your acquisition criteria, then it should be pursued.

The central point here is that every company is for sale — for the right equation.

“Equation” almost always means more than price. It can include timing, ownership, reputation, vision, location and a host of other factors related to the owner’s values and aspirations.  There’s a lot that goes into putting that equation together.  For now, the point I’d like emphasize is: don’t exclude any company from your acquisition search simply because it isn’t wearing a “for-sale” sign.  If you find a company that you believe is the best candidate to meet your chosen strategic need, then my advice is: go for it.

Pursuing not-for-sale companies holds several significant advantages.  Not-for-sale companies put you in a proactive, rather than a reactive, position, allowing you to choose what you want.  The management team of a not-for-sale company will be actively engaged in the business, not eyeing the exits. Often they will be eager to stay on (if you want them to) after the deal is done.  Another benefit of looking at not-for-sale companies is that you can maintain stealth in the marketplace, allowing you to pursue an acquisition that no one else knows about.  It also lets you avoid the auction process, which often drives good people out, and prices up.


Finally, by including not-for-sale companies in your search, you have significantly expanded your universe of potential acquisition prospects.


You could assume that as an M&A expert I’m in the business of acquisitions. But I prefer to say that I’m in the business of external growth. Sometimes, growth is served by taking other routes than acquisition. One of those can be a simple strategic alliance, which can play a useful role in expanding opportunities — within limits.

Suppose you see the need to expand your customer base, but you have hit a ceiling with your current marketing and sales effort. One step you can take is to form an alliance with a partner who is serving the customers you seek with a non-competing product. You can structure the arrangement in countless ways. Perhaps the partner benefits from simply being able to expand his offering; perhaps you pay a commission on sales or leads; perhaps it is more of an exchange, whereby you simultaneously market your partner’s product to your existing customer base.

The appeal, but also the risk, of such an arrangement lies in the absence of equity investment. This means that neither party has an ownership stake in the outcome. Of course the legal contract of the alliance can have everything nailed down beautifully, but there is a significant difference, in terms of energy and commitment, between a legal obligation and a true business commitment.

The strategic alliance tends to the character of a one-night stand, and in fact I advise my clients to restrict such alliances to short-term agreements. I also like to see alliances focused on very specific and limited objectives, such as securing a better network of representatives. With these caveats, the alliance tactic can deliver tangible benefits.

Nevertheless, the question is bound to arise at some point in the relationship: What next? If the alliance falters, the obvious outcome is to withdraw at the end of the contract. But what if it goes well? There may come a time when you will be trying to figure how to get up to the next level, with some kind of equity involvement. I like to address this issue right from the beginning and write into the contract an option for equity purchase if certain conditions or benchmarks are achieved.

Giving the agreement more teeth may take some extra effort at the start of the relationship, but it will open the door to substantially greater benefits in the long term.

When we begin work with M&A clients on their Growth Program Review we normally use Michael Porter’s model, the Five-Forces Analysis.  This shows the five key forces acting on a company’s destiny: Competitors, Customers, New Entrants, Substitutes and Suppliers.

5forcesmodel1This model invites you to look at the pressures on your business from several key perspectives, and provides a tool both for diagnosis and prescription. What I like is that it pushes you to see beyond competition, where most business owners tend to get fixated.

I recall a client in the financial software industry whose entire strategy comprised a breathless reaction to what his competitors were doing. If they added a new function to their application, he set his team to work making a better version of the same upgrade. If his competitors broke into a new geographical market, he dispatched his sales team to set up office there. It was the ultimate “me too but me better” approach. Not a very robust recipe for growth.

The Five Forces model gets you asking a different set of questions, about for example how changes in supply might affect your business, or what barriers face new entrants to the market, or where new technologies might displace your current offering.

To my mind, by far the most important element in Porter’s model is “Customers” because this is the key to future demand. In fact, my one quarrel with Porter is that he positions this element to one side and places Competition in the center. I usually reconfigure it to make Customers — that is, future demand — the centerpiece of the diagram in place of Competitors.

Possibly the single most important shift in thinking Capstone brings to clients lies exactly here. We pull their attention away from their competition and on to their market. Together, we break the spell of the present and lift our eyes to the future.


At Capstone, we talk a lot about “company DNA”. It’s a big focus when we are at the early strategic stage with a new client.  At the outset, we encourage them to ask themselves, “What’s our DNA?”

The company DNA cannot be read off a nicely worded mission statement hanging in your reception area. It is most vividly expressed by what actually happens, day by day, inside those four walls.

As in the human body, your DNA is the aspect of the company that is very, very unlikely to change. IT systems can be replaced. Financials rise and fall. Employees come and go. Procedures get rewritten, product lines are added or removed, marketing strategies get turned upside down. All these are important, but transient, realities of business life. However, there is something about your company that remains stubbornly the same throughout the vicissitudes of the business environment. We’re talking about the underlying character of your firm, in the sense one would speak of an individual’s character. 

If you want to know your company DNA, take a look at these questions:

How are decisions made? By top-down command, or collaboratively? Slowly and ruminatively, or rapidly and instinctively? How are hiring choices arrived at? Strictly on credentials and capabilities, or just as much on personality and team fit? What level of autonomy is given to departments and individuals? How focused is the company on innovation? What value is really placed on customer service? Is the firm more strategically driven, or more opportunistic and reactive? What is the attitude to pricing and discounts? How aggressively do you tend to pursue new business, new technologies, or new talent?

Knowing your company DNA will impact your growth strategy in a couple of ways. First it will help you spot which avenues of growth are most likely to fit the mold and which potential acquisition targets would make good collaborators. Secondly, it will give you useful practice in sizing up those targets themselves. Just as you need to know your own DNA, you will want to know your future partner’s.

Both of you need to take a blood test before a marriage is considered. 



I once had a client that made fish products for manufacturers who in turn created packaged delicacies for the end consumer. My client was tempted at one stage to drift into making consumer products themselves. But they had absolutely no experience or competence in this area. It seemed just a step away, but actually there was a gulf of expertise between the two. Fortunately, the client pulled back before embarking on this hazardous path.

In this case the day was saved by asking an important but oft-forgotten question: What are we not?

For companies with a single product or highly focused offering, the question “” poses no difficulty and you can quickly move on. But As an enterprise expands and becomes more complex, this is an issue of critical strategic importance. Rapid success often blinds owners and leads them into areas where they have no business to be. 

Needless to say, just because you are not something today doesn’t mean you cannot become it tomorrow. The important thing is that any move from what you are to what you can be should be conscious and intentional, and not based on a misconception of your starting point.

Here is why. By blurring the boundary between what you are and what you are not, you can deceive yourself about competencies. So when you review the question “What are we not?” here is how to do it. Look at what business you are in, and where your core competencies are. Make a list of “cousins” that surround those core essentials — the business activities and sectors closest to your own. You are now staring at a list of pitfalls — pitfalls that could become opportunities, but only if you proceed with eyes wide open.

Here’s one principle that Capstone lives by in its work with growing clients. Before you go buying someone else’s company, be sure you fully understand your own. This requires asking a few simple but powerful questions, such as: “What is your core competency?”

Companies, like people, often have mistaken ideas about where they truly excel. And like people, they sometimes need an outsider to shake off their illusions and get clear about the reality. So when you go in search of your core competency, follow some simple guidelines:

  • Don’t trust your own assumptions
  • Look at your company from functional angles
  • See where your resources are concentrated
  • See where your successes are concentrated
  • Ask informed and intelligent outsiders


Here are some specific tactics that can help you focus on your core competencies. Review the key functions of your company – operations, marketing, sales, finance, management – and ask yourself which is the strongest and which the weakest. If you have a superb manufacturing plant staffed by the best in the business, but your sales team is struggling and your marketing strategy gathering dust, it’s pretty obvious where your strength lies. 

Another tactic is to view your firm in a competitive context: What do you do differently and better than your nearest competitors? What do clients seek you out for? Why do they stay? Is it something about the product itself, or a quality of your service and how you deliver? Or is it a perceived value in your brand, a matter of historic reputation or newcomer’s cool? 

Knowing your strengths is one of the most critical factors in building your growth strategy. For one thing, you will be looking to leverage those strengths as you expand rather than taking them for granted. Then you will seek to balance them by finding external resources that compensate your weaknesses. Finally, your strengths represent a marketing asset when you come to approach a potential acquisition. As all M&A players learn, the strategic buyer actually has to sell himself. Your strengths are part of the story that will make a seller take interest in a potential union.


Why do stock market investors sell when prices collapse and buy when prices soar? Why do real estate owners display the same irrational behavior? The math is hardly difficult. It’s better to buy when valuations are low and sell when they are high. Yet human nature seems to require that we run with the market cycles instead of against them.

It’s easy to see how that plays out in M&A. The other day, one of our clients said to me: “We’re retrenching like everyone else”. Well that’s honest, but hardly inspiring. My response is: If you have a plan for growth, stick to it, irrespective of the market. After all, a good financial advisor would say no less about your plan for retirement. Stand by your strategy through good times and bad.

I understand the real world of company dynamics makes this easier said than done. In any organization, there will be a handful of people with the vision to see that M&A is often the fastest track to growth. But in times of economic anxiety, they will be told that their ideas are far too risky, that all we should be doing is focusing on cutting costs and getting by.

In reality, the long-term winners will be those that are seizing on the extraordinary opportunities this current period is producing. They will be more proactive than ever, not just looking for bargains but seeing the chance to expand in existing markets and penetrate new ones by joining force with other players who are now more motivated than ever to contemplate some form of union.

Officially, there’s been a drop of some 27% in M&A deals in the past year. In reality, this number is skewed by the large deals. In the markets where Capstone plays — mostly deals under $1 billion — there is a drop in activity but not to this catastrophic degree.

There are still plenty of healthy companies out there looking for ways to reposition themselves. And they are eager to take advantage of the lower valuations the changed environment has brought. Those that have fire in the belly are taking action to grow.

The mode of growth has shifted, however.  With the debt world crumbling and the flow of private equity almost dried up, creative executives are looking at alternatives to the traditional acquisition. Minority ownerships, joint ventures, strategic alliances… Reviewing multiple paths to external growth is part of the Capstone strategic process, so it’s interesting to see this trend emerging in the market at large.

One force that’s noticeable is the pressure from end-customers for consolidated solutions. They are increasingly impatient with dealing with multiple vendors. This creates the opportunity to become the preferred solution-provider, assuming you can team up fwith one or several other partners to offer a one-stop solution to the customer.

It often takes vision at the CEO level to see these larger opportunities. I have been dealing with a couple of clients recently that have two or three successful lines of business running. There is no obvious problem with any of these lines, but the question comes up: “How do we rise to the next level?” That requires looking across and beyond the current lines to see what is possible through creative union with other players.

exit_strategyHere’s a recent exchange between the two principals in an acquisition we are advising on. Seller to buyer, “So what’s your exit strategy?”  An odd moment in the circumstances. Usually, the last thing M&A buyers have on their minds is offloading the newly combined entity. Seems a bit like talking about divorce at a wedding.

In fact, the seller was revealing a rare foresightedness. Wise company owners keep a constant eye on the exit, and have plans for getting out even as they appear to be getting deeper in.

Few owners I have seen actually exemplify this wisdom. They are too engrossed in the demands of growth, worrying about the next contract, the new hire, the late delivery… They are staring at the ground three feet ahead of them, not the far horizon. So when do they actually get to consider selling? When disaster strikes. A major account is canceled. A new competitor surpasses their technology. Three of their key people leave.

Well no surprise, that’s hardly the optimum time to sell! Do you really want to put your company on the market when it’s worth the least? Better to think ahead while times are good. Having an exit strategy doesn’t oblige you to leave. Planning how to attract a buyer doesn’t compel you to hang a “for sale” sign on the door.

You should not only have an exit strategy, you should keep revisiting and updating it as the market changes.  That way, you’ll be positioned to take advantage of your company’s strengths, rather than risk falling victim to its weaknesses.


In my last post I commented on the opportunity that has risen in the mid-market with the concentration of investment banking focus on major deals. There’s a chance for third-party advisors like Capstone to do more than fill the vacuum recent events have created.

However, it’s important to understand what the gap really is — and actually always has been.

The problem with investment bankers is their hunger for the deal. It’s a healthy instinct in itself, but in the world of mid-market M&A where I operate it needs to be held in check by a broader perspective. The Capstone “road map” for acquisitions comprises three major components of which “Build The Deal” is only one — the third and last. The first two components are “Build The Foundations”, which establishes the strategic objective, and “Build The Relationship”, which sets the stage for successful negotiations.

Investment bankers by training and inclination tend to rush to stage three, “Build The Deal”, without giving adequate attention to “Build The Foundations” and “Build The Relationships.”  If you want one reason why 77% of M&A transactions end in failure, this is it.

To win at this game, you must know exactly why you are making an acquisition. As I’ve written elsewhere, successful M&A deals are driven by ONE clearly defined reason. Arriving at that one reason takes a process of strategic analysis.

As soon as you have your strategic objective, and a clearly defined path to achieving it, you’ll begin exploring possibilities with a number of target companies. There is a tremendous amount of skill required in this process of courtship, which may be going on simultaneously with several potential acquisitions at the same time.

M&A consultants to the mid-market who help their clients through these two challenging stages will have far more success with third stage, closing the deal, than most investment bankers. I know this for sure, because the success rate of Capstone’s deals is so far above the average.

This is a period of enormous change in the financial, business and  worlds. With change comes opportunity for creativity and leadership. Who do you see rising to the challenge? I’d welcome your comments on this.

The short answer is: they got bought up by massive banks. The rapid consolidation of the investment banking industry is one of the most dramatic developments amidst the recent financial turmoil. The independence of the old IB firms has vanished, consumed by monolithic multi-function institutions like Bank of America.

The real question is, what does it mean for M&A?

Think of what happened as the accounting industry consolidated, gradually condensing to the Big Four that survive today. Operating on the scale they do, these institutions fix their sites on the largest possible accounts. They become almost exclusively oriented to major public corporations. For mid-market companies, they tend to provide an off-hand service, highly priced and staffed by their lowest tier consultants. We’ve seen a similar trend in the consolidation of the big law firms.

Now look for the same effect in the investment banking industry. They will continue to pay lip service to the mid-market, but the energy will shift to the corporations that are a closer match to their own scale.


For the mid-market, this will trigger a classic “creative-destructive” cycle.  It will open the way for specialist third-party advisors who are not investment bankers in the old mold. They won’t provide securities offerings or lead IPOs. They may not be so exclusively focused on the sell-side as investment bankers have tended to be. In fact, this new breed of mid-market M&A advisors will do more than fill the gap left by the investment bankers. They will provide broader strategic consulting, helping their clients

manage external growth programs that include acquisitions and other pathways of opportunity.

Full disclosure here: this is the model that my firm Capstone has been pioneering for several years.

If you’re thinking of buying another company, the scale of your projected acquisition is an important question you need to settle early on.

Your objective is growth, and it would be easy to deduce from this that the bigger your purchase, the better. Not so. You’ve heard the familiar question, “How do you eat an elephant?” with the equally familiar answer “One bite at a time.”  That’s the mindset that works best when strategizing your external growth.

It is dangerous to try to expand too far too fast and to make a quantum leap by acquiring a company much bigger than your own.  A series of small acquisitions will give you a better chance that each one will tightly fit the need it is supposed to meet.  Your acquisitions will also be easier to integrate and assimilate into your company’s culture.

This principle makes all the more sense when you combine it with my “rule # 1” — have a single reason to buy. Making several highly focused acquisitions will get you further, with more safety, than trying to meet multiple goals with one huge purchase.

Companies buy companies to grow, but that doesn’t tell the whole story. In reality, there can be multiple reasons for an acquisition. Here’s a snapshot of some of the most common:

  1. Increase Top Line Revenue – The ultimate objective in any business is higher earnings, and to reach that goal you will eventually have to raise your revenues.  Cost reduction has diminishing returns and organic growth has its limits, so acquiring a healthy, cash-flow company can lead you to positive earnings/holdings.
  2. Expand in a Declining Market – In a waning market, acquiring a bigger portion of it will allow you to maintain (or even increase) revenues while you wait for the market to rebound.  And if it does not, you will at least own a larger slice of a smaller market. 
  3. Reverse Slippage in Market Share – If your company is losing its share of an important market, making an acquisition could stop this slide – so long as you figure out why the slippage is occurring.  
  4. Follow Your Customers – Your customers may be seeking products or services that you currently do not provide.  Adding such products or services to your portfolio through acquisition gives them a “one-stop shop”.
  5. Leverage Technologies – Rather than develop a new technology to stay competitive or to spur product innovation, it may be more cost effective to acquire a company that already owns that technology.  Acquisitions give you the unique ability to pick a “winner” amongst the various versions of a particular technology.
  6. Consolidate – Acquisition of a company in the same markets with the same products or services as your business allows you to increase purchasing power or reduce redundant expenses by capturing economies of scale.
  7. Stabilize Financials – Buying and incorporating a business with higher margins will bring stability to your balance sheet.  Cash cows die and businesses are affected by cyclicality and seasonality – an acquisition lets you invest in a new breed.
  8. Expand Your Customer Base – Some corporate customers are tough to penetrate, and having your sales people try to steal them often just won’t work.  Acquiring a competitor will give you access to their customer list and the relationships they have built.  
  9. Add Talent – Bringing aboard a seasoned executive or dynamic development team from an acquisition brings fresh human resources to your business.  Acquiring for this purpose can be seen as a “group hire.”
  10. Get Defensive – The best way to fend off a competition may be to directly purchase the competitor itself or by to buy a valuable company that your rival is positioned to acquire. 

    I’ve mentioned in an earlier post the importance of having ONE reason to buy, not several. Hopefully this menu of common motivations may help you focus on your singular purpose for an acquisition

    Let me know your thoughts. Your comments are always welcome.

    I was struck by Matthew Karnitschnig’s excellent article in yesterday’s Wall Street Journal. His opening line was perhaps an overstatement — “M&A is almost dead”. But the gist of his piece is right on the money.

    Mr Karnitschnig’s theme is the one I have been pounding in this blog for the past few weeks. In the world of M&A, cash is king. He points out the shift of power from sellers to buyers, and the extraordinary advantage held by cash-rich companies right now.

    Despite that advantage, even the cash-rich players are mostly sitting on the sidelines right now.  Nevertheless, those that come out to buy are able to seize on significant opportunities that weakened companies present. The article also points out the rise in PIPEs (private investment in public enterprises), and makes an accurate observation that in the current climate, even where cash is available buyers are shifting their preference to stock purchases. Why? To hang on to the cash, of course.

    One other very striking comment: “With growth unclear, buyers are more focused on what companies are earning now than what they may earn in the future.” That is no doubt true, but it’s an alarming truth. If you are considering a purchase, this is a trap you must make every effort to avoid.

    One reason the deals we put together at Capstone are so frequently successful is that we are adamant about one principle: strategize your acquisitions in terms of future demand.

     you are contemplating growth through acquisition, let me offer one rather obvious piece of advice. Know why you are buying. 

    At Capstone, we impose a strict and simple rule. Have ONE reason, and one reason only. A single reason, a single strategy, a single company: that is the discipline of success. Trying to fulfill multiple needs through one acquisition will meet none of them particularly well. 

    Think back to the infamous AOL–Time Warner merger. The press release issued to announce the deal is very revealing. Here is what it said:

    “No company will be able to better capitalize on the convergence of entertainment, communications, and commerce… the possibilities are truly endless. The true value of this union lies not in what it will do today, but what it will do in the future.”

    While possibilities are endless, actualities can be avoided. AOL-Time Warner fell victim to an undisciplined strategic approach. Lacking a single, specific rationale, the merger became that most dangerous and wasteful animal: a solution in search of a problem.

    Here for contrast is a press release that a client of mine, a German manufacturer, released after we helped them acquire an American competitor:

    “This acquisition will allow us to accelerate our growth strategy to manufacture and distribute our products in the U.S. market.”

    No glowing rhetoric here, but the reason for acquisition is clear: expand the customer base by entering a new market.  Unlike the more spectacular AOL-Time Warner merger, this has been a successful and profitable marriage.

    Singularity gives focus, and focus generates results. You can read by a defuse light, but to cut through steel you need a laser beam.  Our German client had a focused acquisition effort and was successful because of it. If you want a profitable result, follow the Capstone rule: have only one reason to buy.

    What might your objective be? Share it here (you can disguise the details) and I’ll give you my feedback on your acquisition approach.

    My company Capstone is in the business of helping clients with external growth, and that usually means buying another company. But not always. It’s easy to miss a rich field of alternative opportunities if you just latch on to acquisition.

    Let me just focus on one of these: minority interest ownership. This surprisingly neglected tactic has many significant benefits. First of all, assuming you have a limited budget to invest in external growth, buying several minority interests allows you to spread your risks. You don’t have to put all your eggs in one basket.

    Secondly, you can purchase an interest in a company that would otherwise be too expensive, or too big for you to comfortably acquire whole.

    A third benefit is that your investment as a minority owner is unlikely to trigger the departure of a management team that you may want to see remain for some years to come.

    An instinctive objection arises when I raise the possibility of minority interest purchases with clients. “But we want to control the company we are buying” They think of minority ownership as a kind of passive investment where you effectively have no decision power over what happens.

    In reality, you can often have your cake and eat it — purchase a minority interest and exercise the control needed to achieve your goals. If there are specific results you are seeking from an acquisition, you can have these written into your minority purchase agreement. They might include customers, suppliers, technology, personnel or any other asset that is motivating you to make a purchase. If you are looking for more widespread influence, you can also stipulate a presence on the board.

    Sometimes a small piece of a big pie is all that’s needed to satisfy your company’s hunger for growth.

    Common sense suggests that growth is simply about getting bigger — having more customers, more markets, more products and more revenues. In reality, a successful growth strategy should help you become increasingly focused and effective. Of course you want to increase your profits, but higher earnings don’t automatically flow from supersizing your company. 

    In fact, the opposite can be true. 

    I prefer to see an acquisition strategy as a way to recalibrate the company, bringing it into closer alignment with its inherent purpose and current market conditions. Recalibration is an endless necessity today, because economic and technological changes are remapping the business environment at such an extraordinary rate. We could rewrite the familiar maxim “Grow or Die” as “Recalibrate or Die”. 

    Another way to put this is that “growth” can sometimes mean doing less of something. It can mean shedding customers. It can even mean divesting whole divisions of your business. In my seminars on M&A, I often refer to General Electric, an avaricious acquirer of other companies. I point out that in recent years GE has tended to sell as many companies as it has bought. A continuous process of selling and buying allows management to define and redefine what this great corporation is really about.

    Naturally any idea of contraction is counter-intuitive to the entrepreneurial owner whose eyes are fixed on a horizon of endless expansion. At Capstone, when we introduce the re-calibration concept to clients, we often meet initial resistance, but those who are willing to stay with the program see remarkable results.


    The statistics are frightening. By most reckonings, 77% of company acquisitions fail. That failure rate has nothing to do with luck. It is the telltale statistic of widespread ignorance. Now when I say “ignorance” I don’t mean lack of expertise. That’s the paradox. 


    I often encounter clients who tell me, “Yes, we have an in-house M&A expert…” It turns out the expert really does know a lot — about due diligence, or company valuation, or negotiation. The problem is, a chef who’s only mastered salad dressings is unlikely to run a profitable restaurant. 

    Buying a company successfully depends on knowing more than one piece well. It requires your mastery of an entire, integrated process, with all the functions working together. When I am teaching M&A — to doers, not academics — I often use the phrase “from beginning to beginning.” My point is that the end of a transaction marks the beginning of a whole new business reality, the merged entity. Between those two beginnings lies a sequence of steps, each of which must be diligently completed for a successful outcome. It’s a journey, and any journey significant requires preparation. 


    In the harsher climate we’re heading into, the risks of failure in M&A are sure to increase. At the same time, for those with the right map in their hands, the opportunities for reward may be commensurably greater.


    If you want to read a decent book on M&A, be prepared to spend $70 or $80, and set aside several days to plough through a heavy-duty tome for business students. There are exceptions, but for the average business reader there’s remarkably little to guide you through our world of deals.


    So I’m writing a book. And it won’t be 500 pages long, or cost $70! The working title is “A CEO’s Guide To M&A” and its really for the kind of people I do business with — leaders of substantial companies and divisions in the mid-market sector. 


    M&A has a peculiar aura in the business world. On the one hand, there’s the fascination of massive corporations eating each other alive. On the other hand, there’s all that dreary academic literature. The subject seems simultaneously glamorous and impenetrably dull. 


    In reality, most acquisitions are not multinational mega-deals. Every year, hundreds of transactions are consummated between companies below the $1 billion revenue level, the majority privately owned. You will rarely read about these deals in the business press, and by definition a private transaction yields less public information. Yet this activity is absolutely essential to a healthy economy. 


    One thing I’ll be emphasizing in my book:  the true function of an acquisition is not just growth, but recalibration. Buying another company will change yours, for better or worse depending on how strategic your approach. By the same token, M&A as a whole serves to recalibrate entire industries. It’s one of the market’s most effective mechanisms for self-correction and positive evolution.


    That’s why I’m hoping my work will interest the general reader, as well as CEOs. The better you understand acquisitions, the better you understand business itself.

    “Our strategic plan calls for us to double our size…” I hear it often. As a plan, it’s usually very successful in

    doubling the stress of frustrated executives. By massive efforts to improve products and smarten the marketing, they can get revenues from $100 million to $125 million. But $200 million? They pay lip service to the dream of “doubling” but in their hearts they know it’s a pipe dream.

    Which it often is, if your only engine is organic growth — that’s to say, growth from the inside of your current operations.

    The missing piece here is M&A. In many cases, the only realistic way to hit that major goal is growth through acquisition. So why don’t more companies look to M&A as a serious strategic component?

    Often the reasons are quite practical and mundane. Nobody has the time for it. The idea of an acquisition gets tossed around, and it looks quite sexy. But who will get in trouble for not pursuing it? Whereas a failure to lift those sales numbers, or shave that margin, or accelerate that product line, can hurt your career.

    Pushing the envelope of organic growth can consume all the time and energy a company has, and leave nothing to spare for M&A — ironically, the potential engine for massive expansion.

    One possible solution: enroll a third party to lead and manage your acquisitions program. You’ll still have to invest some internal time and resources, but the burden shifts to an outside expert and it will be their job to push the M&A program forward.

    Leaving you time to squeeze another inch of growth from your existing business.

    This post was contributed by Capstone’s Managing Director, John Dearing
    Photo Credit: Graham C99 via Flickr cc