Business acquisition in the Mergers & Acquisitions space doesn’t always mean a 100% exit for each member of the ownership or management team. Over the last several cycles, business owners have been sticking around for that ‘second bite of the apple,’ primarily because M&A investment partners can be catalysts that allow businesses to grow well beyond the founder or second generation’s capacity. M&A activity generates capital and resources typically unavailable to business owners through traditional financing sources such as banks and credit providers.
Lending options continue to tighten given inflation’s unpredictable volatility, and increased labor and vendor costs linger, continually compressing profit margins. Lack of access to cost-effective capital will limit business owner’s ability to re-invest and grow. Unless business owners are content with battening down the hatches and waiting out stretches of economic ebb and flow, they can look to alternative and innovative growth strategies. This is where M&A is a powerful tool for business owners to create lucrative re-capitalizations and long-term generational wealth.
What resources do you need as a business owner to facilitate growth? Are you comfortable with your current business operation output? Are there growth potential opportunities out there that you’d pursue if you only had the money and infrastructure to do so? Many business owners never recognize their limitations and are unaware of the opportunities for growth financing.
When provided the proper guidance and capital necessary to facilitate growth, small and lower middle market businesses can become major enterprises beyond their current size and scope. Besides capital for growth, investment partners bring access to their relationships with professional resources and networks of customers, clients, suppliers, lenders, and infrastructure upgrades. The quality of available resources improves immediately.
Investment partners bring decades of operational scaling experience at a professional level. Often, investment partners can pool resources from their stable platform companies to leverage many fixed expenses. With investment partners’ access, owners are able to streamline costs, negotiate better supply and equipment pricing, and negotiate more cost-effective service and insurance contracts, creating instantaneous profitability. Investment partners also bring varied best practices that help fuel strategic and profitable growth.