Buy! Sell! Merge! Mergers and Aquisitions

*** First in an occasional series of Slater Success Blogs that focus on Mergers & Acquisitions. This first one deals primarily with Family businesses. ***

Understanding Mergers & Acquisitions is sometimes something businesspeople are not ready for. Business leaders, however, should not only be aware of M&As but should have a strategic plan in place that takes M&As into account as an exit option.

Family Business

There’s a saying in Family Business that goes:

1.  First Generation Builds It,

2. Second Generation Expands It,

3. Third Generation “Tanks” It.

OR the Third Generation sells it, so descendants maintain a wealth component in the family of what was built from the generations before.

If the Third Generation isn’t interested in holding on to the family business, there are options -- they can sell it to the business’s Leadership Team, or sell it through a private equity firm, or sell it off as an acquisition. 

As a business leader, you don’t wait to have a problem with family businesses. How do business leaders react when something unexpected happens and hits them squarely in the face, like health issues or death? We are not programmed to know how to navigate through out-of-the-blue or personally tragic circumstances. 

An actual family business case in point, familiar to Slater Success:

Part One

Two young siblings - let’s call them Joe and John - have a plan to start up a business. They spend two years working on securing an SBA loan, which is finally accomplished by having Joe’s father, William, co-sign the loan as a ‘silent’ partner. 

Four months after the business opened its doors on an icy day in January, a horrific accident occurred. John goes out for a coffee break. There had been a water main break that day, and John tragically gets hit by a truck, skidding into him on black ice. Joe manages to get John airlifted to the hospital, but he dies on arrival. 

When starting a business as Joe and John did, you're deep into articulating a vision, thinking about strategies, and putting an action plan into place, and of course selling to bring in revenue. You're not thinking about or planning for tragedies. Unless … you've already developed a strategic plan with a clear succession plan ready to execute. 

Succession planning within a strategy should not happen when you're looking to retire. It ideally happens while planning to grow the company. It's precisely then that you must think about the company's succession. This comes from life experience and countless episodes of advising Slater Success clients on the necessity of succession planning. 

Succession planning is constructive when scaling one’s business for growth. Rather than selling a company with a proven track record and poised for more growth, it’s worthwhile to consider the merits of merging with a larger company. 

Let’s return to the actual family business case noted above, familiar to Slater Success:

Part Two

Fortunately for Joe, his building supply company survived the deaths of both his partner, John, and his ‘silent’ partner, William (aka Joe’s father.) This happened through sober management of company resources and accurate growth planning. 

Ten years later, Joe sees the need to scale his business. He is confident in his ability to lead the company through growth by opening more warehouses. 

Joe considered getting another SBA loan but also looked around at opportunities to merge with other building supply firms that already had multiple warehouses. He found just such a partner and traded off his status as being “a big fish” in his small pond for having a smaller piece of a larger, merged company. 

Joe has stayed in his industry for the past 25 years and his positioning and businesses have evolved based on the evolution of his industry.  Note, all industries evolve and great leadership is always staying in the pulse of their business/industry.    

The lesson with Joe’s case history is that Mergers and Acquisitions are vital pieces to be aware of as a strategic maneuver within a company, such as a family business. You never want to do it because you have to. You want to be thinking all this through with strategic forethought. 

That’s the position Slater Success brings when considering succession planning and exit strategies. 

Tips for M&A Planning 

Culture Fit

Does your organization culturally align with the M&A business to be successful? 

Financial Analysis

Are your financials in order? Are your reports up to date? Can you quickly access any information you may need? 

Short-Term / Long-Term Business Goals

Does a merger, acquisition, or sale align with your short- and long-term business goals? You may need to face whether now the right time is to make this significant change. 

List the Pro’s and Con’s

Thoroughly examine whether or not to move forward. If “yes,” prepare yourself for next steps.

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No matter what industry you are in, our expertise can guide you towards expanding your business by year-end and for every year to come. Let's collaborate to cultivate innovation, foster customer connections, and set your business to continuous success.