By John Martinka
Jan. 27, 2011
The Super Bowl of growth strategies is growth by acquisition. Savvy CEOs and owners know that this strategy works and always have their eyes open for good opportunities because they also know that slugging it out in the trenches gets old.
Acquiring another business in early 2011 is like getting out of the stock market on Sept. 14, 2008. It’s exactly the right time. The recovery has been slow for many small to mid-sized companies and that means frustrated owners — especially those owners who have not been proactive and are waiting for the recovery to carry them back to solid profits.
Demographics also play a part. Baby boomers are highly entrepreneurial and own a large percentage of businesses. Retirement, health or the next great adventure in life are causing more and more of them to look to sell. For many, an individual financial buyer is out of the question (in this case being a corporate executive who must take a salary and have profits to pay the acquisition debt). As I write this, a client is about to close on the purchase of a similar business where he is just about the only buyer for this company (no individual will ever buy it and it’s too small for private equity). Sellers in this situation must realize their best option is another business that can leverage the reasons in the next section.
Why buy another company? Here are five good reasons (although there are others):