Uncertainties in the marketplace—combined with many firms being in a strong cash position—have created an environment ripe with opportunities for mergers and acquisitions. M&A tends to focus on two primary scenarios. The first is a tactical acquisition that increases an organization’s size and scope in its market. It often adds capabilities that can be leveraged into existing customers. “Bulking up” can also make a company look more attractive as a component of an exit or sale in the future and in the interim can provide additional resources. The second major acquisition type is strategic. The acquisition extends a company into a new market, agency or command.
In either circumstance, there are risks. Strong due diligence coupled with a reasonable price are the best measures to avoid an unsuccessful acquisition. Whether a firm will be a buyer or seller, it is important to conduct your own valuation, due diligence, and internal review, over and above financial valuation, before a buyer, seller, bank or investor looks at your firm.
To discuss valuation reviews, contact Sid Jaffe at (703) 855-3160.