Mergers and Acquisitions as a form of development of small and medium-size enterprises sector
Managers from the sector of small and medium companies more often turn to us with a question concerning the further development of their business. Owners’ expectations often outweigh the possibilities while limiting to internal growth. At low concentration one does not have any direct impact on the pace of branch development, and the increase above that level often leads to artificial generation of sales, followed by a sharp decline.
An alternative solution recognised by the growing number of managers is the market control (Mergers & Acquisitions). M&A activity is now the domain of medium and large companies, not only because of the measures that need to be involved in carrying out the transaction. A more important factor is the division of functions of owner and manager. The Presidents of these companies, professionals who know a modern economy must develop their enterprises much faster than the market in order to achieve the aims planned and required by the owners. It is natural then to use growth tools such as taking control over the competition (horizontal mergers) or over elements of the supply chain (vertical mergers).
Unfortunately, according to the latest research, SME sector is still characterized by low activity in mergers and acquisitions. The growing dynamics of transactions and their value indicate, however, a great potential in this regard. With our services we want to raise awarness among managers that the funds are not a necessery requirement to carry out the transaction. Moreover, it often happens that we pay for the acquisition with the money… of the acquired company. Although the process is long and complicated, it often proves to be the only opportunity of the development of small and medium-sized companies, which have reached almost everything in terms of organic growth. Without further action, their competitive position becomes weaker because in the nearest future there will emerge another enterprise that will take such a company over.
The author is a consultant in our company.