A\u00a0 recent article in M&A Today offered some observations concerning current and future M&A trends.<\/p>\n
\u201cThe business world is constantly changing.\u00a0 For the first half of the 20th century, vertical integration was the objective in which, oil companies, for example, owned the entire process from drilling to retailing at the gas station.\u00a0 From 1950 to 1980, diversification was in vogue.\u00a0 Recently, the trend is to outsource everything except the core business.\u00a0 One of the new business models known as the new profit imperative is to go downstream and get closer to the ultimate customer.\u201d<\/p>\n
Today\u2019s M&A Climate<\/strong><\/b><\/p>\n Many companies still look to acquisitions as the best way to increase both capability and market share.\u00a0 Acquisitions generally add complementary products, new technology or increase geographic coverage.\u00a0 Interestingly, today\u2019s companies are investing in new ventures, while, at the same time; divesting themselves of some of their original businesses.\u00a0 Since these \u201coriginal\u201d businesses now have low margins and slow growth, they are being sold off.\u00a0 Quite a few of the large public companies have spun off some of their original core businesses.\u00a0 One company \u2013 Perkin Elmer \u2013 sold off all of its businesses including its name and reinvented itself as PE Biosystems.<\/p>\n \u201cThe previous M&A drivers, such as the need to grow externally as well as internally; the pressure for industries to consolidate; and the ongoing globalization, are all prevalent.\u201d<\/p>\n Tomorrow\u2019s M&A Climate<\/strong><\/b><\/p>\n 1.\u00a0\u201cStrategic acquirers will not only be more particular and demanding about the fit of the target company, but they will continue to divest divisions with the least potential or with low returns.\u201d\u00a0 Edward C. Johnson of Fidelity Investments summed it up best: \u201cMy own rule of thumb is that a business has to be good for the customer (quality), good for the company (profitable), and good for the employees (rewarding).\u00a0 If we only achieve two out of three, we have not succeeded.\u201d<\/p>\n 2.\u00a0Gone are the high prices of the late 1990s.\u00a0 \u201cThe structure of the transactions will have a higher cash component, but there will be an emphasis on more contingency factors or tighter representations and warranties in an attempt to minimize risks inherent in the deal.\u201d<\/p>\n 3.\u00a0Intangibles will be more important than ever.\u00a0 Areas such as \u201cthe brand\u201d will be more important.\u00a0 Branding represents a company\u2019s \u201ccredibility, its true identity, its meaning, its uniqueness.\u201d<\/p>\n 4.\u00a0 \u201cThe use of strategic alliances and joint ventures will be used more frequently as a forerunner or in lieu of acquisitions.\u201d\u00a0 Technology changes so quickly today that one company, especially in hi-tech, can\u2019t do everything.\u00a0 Alliances and joint ventures provide earnings without the dilution of acquisitions.<\/p>\n 5.\u00a0The requirements of the new Sarbanes-Olxey regulations will impede a lot of acquisitions, according to industry experts.\u00a0 This increase in regulatory requirements due to this new law may not only slow down the process, but may actually kill a lot of deals. This is especially true when public companies acquire a privately held one.\u00a0 Sellers of these companies are going to provide a lot more audited financial information.<\/p>\n 6.\u00a0Over the years, many mergers and acquisitions have been within the same industry.\u00a0 There is a trend towards merging companies that can \u201cpiggy-back\u201d ancillary services.\u00a0 The recent attempt by Comcast to merge with Disney is a good example \u2013 distribution merging with content.\u00a0 Another excellent example is General Electric.\u00a0 They manufacture jet engines, turbines, medical equipment, finance it through a GE finance unit, and then service it through another GE division.\u00a0 The trend seems to be that more manufacturing companies \u201cwill acquire relevant service companies as a way to capture more profitable businesses.\u201d<\/p>\n More recently there has been a trend to outsource everything but the basic business.\u00a0 One thing is sure in the world of mergers and acquisitions \u2013 change will always be taking place.\u00a0 It is important that sellers and their advisors stay abreast of these constantly changing trends.<\/p>\n","protected":false},"excerpt":{"rendered":" A\u00a0 recent article in M&A Today offered some observations concerning current and future M&A trends. \u201cThe business world is constantly changing.\u00a0 For the first half of the 20th century, vertical integration was the objective in which, oil companies, for example, owned the entire process from drilling to retailing at the gas station.\u00a0 From 1950 to […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-560999","post","type-post","status-publish","format-standard","hentry","category-general-business-brokerage"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/560999","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/comments?post=560999"}],"version-history":[{"count":0,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/560999\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/media?parent=560999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/categories?post=560999"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/tags?post=560999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}