Expanding your business into a new market, especially an international one, is an exciting, yet tricky undertaking. There are many benefits to growing your business globally including reaching a new set of customers and a new geographic market. At the same time, success does not come easily. You must grapple with regulatory challenges, cultural differences, and country-specific dynamics. One wrong step and your time, energy and resources may all be wasted.

How can you ensure your success?  Matt Craft, Vice President of Capstone addressed these issues in a workshop hosted by the International Trade division of the Virginia Economic Development Partnership (VEDP) in Charlottesville, Virginia.

In his presentation, Matt explained that success begins by considering which customers you want to reach and what markets they will be in. Next, you select the right market for your business by looking at those that have a healthy, stable demand for your products and services now and in the future. A careful analysis of future demand is important to growth. You don’t want to spend lots of effort entering a market only to find that it is shrinking. Your new international market should support your company’s long-term growth goals.

Learn more about market entry strategy in our special report: “Markets First – M&A the New Way.”

Photo Credit: Kevin Gill via Flickr cc

Selecting the right market is critical to successful growth. The market should have healthy, stable demand for your products or services and be aligned with your overall growth strategy. We strongly recommend selecting a market prior to identifying acquisition targets or potential partners. Without understanding market dynamics, you may be tempted to pursue what looks like a promising opportunity, only to find that the market is in a serious decline.

So how do you go about researching, identifying, evaluating and prioritizing markets? Managing Director John Dearing and Project Manager Matt Craft share the secrets to success in “Picking Top-Notch Markets” presented at for the Virginia Economic Development Partnership Program (VEDP)’s VALET spring meeting. Watch the video presentation below:

“How often do you get involved in a situation where a company is pursuing a ‘usual suspect’? And how do you handle it?”

This question was asked after Capstone’s presentation on “How to Pick Top-Notch Markets” by Project Manager Matt Craft and Managing Director John Dearing at the Virginia Economic Development Partnership’s VALET spring meeting.

This is an excellent question because the situation is extremely common. A “usual suspect” is a company that easily comes to mind because you already have an existing relationship. It may be a supplier, competitor or industry partner or it may be a company owned by your CFO’s sister. Naturally, because “usual suspects” are the easiest prospects to find, many companies begin their M&A search with them.

There’s nothing wrong with looking at them, but because of your pre-existing relationship it may be difficult to remain objective. In addition, we find that many times clients are only considering one familiar company and no other options.

When studying a usual suspect, we recommend taking a step back to remain strategic and objective throughout the M&A process. Use strategic criteria to objectively assess the company. How does the company align with your strategy? Is it really a good fit? Or have you been blinded by love?

We also recommend considering at least two other companies so you have three options for the sake of comparison. Without a comparison, by default the usual suspect will be the best and only prospect. If it’s truly the best prospect, it will withstand the scrutiny of criteria and comparison to other companies. You may even find that one of the other options is actually a better fit for your company

We know it’s difficult to say “no” to the usual suspect, especially if you have your heart set on it, but remember, acquisition is a huge undertaking. You cannot afford to make a decision based on emotion or incomplete information. Consider multiple options and use strategic criteria to make the best decision about your acquisition prospects.

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Learn more by attending our webinar “How to Pick Top-Notch Markets.”  Click here to register.

How do you find the best market for your product or service?

Capstone Project Manager Matt Craft answered this important question on the Market Selection Panel at the Virginia Conference on World Trade in Richmond, Virginia on October 30.

Hosted by the Virginia Economic Development Partnership (VEDP), this is the state’s largest international trade conference and is focused on expanding international business with participating representatives from the Middle East, Australia, Canada, Brazil and Mexico. The 250 businessmen and women who attended and heard Matt came from various industries that included engineering, manufacturing, professional services and IT.

Matt discussed how to go about selecting the right market and the importance of using tools for prioritization and good decision-making. As a critical step in following future demand, selecting the right market begins with thinking about which customers you want to reach and what markets they will be in.

Market selection isn’t always about geography, Matt explained, but could also mean deciding between vertical markets such as healthcare, retail, or industrial products. The idea is to select a market where you see a growing demand for your business’s services or products. By entering a growing market you can position your company for long-term growth.

In more than ten years as a Virginia Leaders in Export Trade (VALET) Program Partner, Capstone has advised many companies on the market selection process.

Learn more! Free special report:  “Markets First – M&A the New Way.”

Capstone again participated in the VALET Program Partner Roundtable, a program that helps companies throughout Virginia expand their international business. We have been selected as a partner for this award-winning program for more than 10 years.

VALET offers a powerful combination of capital resources provided by the state along with professional services from expert, private-sector partners.

Our efforts at VALET are spearheaded by Managing Director, John Dearing. As a program partner, Capstone offers pro-bono consulting services and free educational webinars to active VALET participants.

Capstone worked with three of the 11 participants from VALET’s most recent graduating class, reflecting our knowledge and expertise in corporate growth strategies in a wide range of manufacturing and service industries.

Mike Melo, CEO of ITA International and a VALET graduate, acknowledged Capstone’s help in defining strategy and direction for his global support services company. The strong relationship between Capstone and ITA developing in the VALET program will continue; we are actively working on projects together.

Because our mission at Capstone is helping our clients achieve their dreams, it is particularly rewarding to see the continual growth of the companies we’ve served. Even as some of our clients graduate out of the VALET program, we’re excited to continue our relationship beyond VALET.  We also look forward to working with and supporting the incoming VALET class.

It’s no secret, especially in Washington, that sequestration has hurt many businesses in the defense industry.

A high-level defense official reported that military-related M&A deals have stalled due to the uncertainty. Brett Lambert, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Policy, said banks are unwilling to lend to smaller defense firms over doubts such companies will remain in business, and be able to pay off their debt.

Their concern is warranted. Smaller firms are less able to recover from the loss of a contract than larger companies that can spread the costs and leverage economies of scale. Unfortunately, most defense cuts will be smaller contractors as opposed to large weapon programs, says Frank Kendall, the U.S. Undersecretary of Defense for Acquisitions Technology and Logistics. In addition, many small firms are research and development driven, and with cuts to the R&D budget the military will be unable to fund their research or buy their innovative products.

In any business, there are circumstances that are beyond your control. Changes in demand, competitors, disruptive technologies, new regulations and market conditions are a few of the factors that can affect your success.

For those in the defense industry, sequestration is an unforeseen circumstance that would have been difficult to predict before the financial crisis.

So what can you do if you find yourself in this situation? How can you thrive when markets are saturated and demand has decreased?

The key is to remain proactive and seek out opportunities for growth. At my firm, we often use the Opportunity Matrix to focus on future demand and evaluate the best options for growth. Future demand, after all, is key to company success.

The Opportunity Matrix can be used to find the optimum market where future demand will be the strongest. The grid (pictured below) allows you to assess both existing and future demand.

The Opportunity Matrix

Capstone often uses the Opportunity Matrix to focus on future demand and evaluate the best options for growth.

In light of sequestration and the expected cutbacks across the industry, many are choosing to leave the defense industry. A firm faced with declining revenues might choose “Distribution,” bringing products or services to new markets.

The most obvious choice for many is to expand to new geographic markets, and in fact firms are going overseas to sell to other governments. The Virginia Economic Development Partnership has even put together a “Going Global” Defense Initiative to help Virginia defense firms get a foothold overseas.

Another equally valuable, but less obvious opportunity is expansion to new vertical markets. By this I mean marketing your existing products in a new industry. Can your defense products be used in another industry such as oil and gas, construction or healthcare?

While you can’t always control external factors, you do have the ability to study your options. By being proactive instead of reactive, you open the door to growth, regardless of your circumstances.

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Capstone recently was invited to the Virginia Economic Development Partnership (VEDP)’s Chinese Investment Promotion Agency (CIPA) Delegation Seminar to present on M&A opportunities for Chinese companies in Virginia.  There are many opportunities for investment; see some of the latest trends in the chart below.

China’s inbound and outbound M&A activity has been rising, with 47% of Chinese business expecting acquisitive growth. In the first quarter of 2013, outbound investment in U.S. companies increased by 57% to $8.2 billion, according to Reuters. Shuanghui International’s purchase of Smithfield Foods for $4.7 billion, if approved, would be the largest acquisition of a U.S. company by a Chinese company.

This is only the beginning. As China’s market matures and its middle class increases, Chinese companies will look for more opportunities abroad.

 China M&A Trends

China Cross-Border M&A Activity

China M&A Recent Deals


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