A recent survey conducted by consultancy firm Ernst & Young found that many companies around the world remain reticent to become involved in business acquisition, though many say they are becoming increasingly more confident in terms of the global economy.
Our Boston business lawyers know that business acquisition in Massachusetts is always a matter requiring careful thought, detailed analysis and experienced legal guidance.
This is not a decision you make flippantly, and we understand a certain amount of reluctance as we emerge from a battered economy. Yet, those who take the risks now are the ones who will likely end up with the future reward.
The Ernst & Young bi-annual assessment of big company intentions found that increasing confidence in the economy hasn’t yet translated into more acquisitions and investments. The survey questioned more than 1,500 senior executives working for companies in 50 different countries, the majority of which raked in annual profits of more than $500 million.
Encouragingly, more than half of the executives believe the global economy is improving, which is more than double what we saw in an attitude survey at the end of the third quarter of 2012.
Historically, we would see improved sentiment illustrated in a growing number of acquisitions and mergers. Right now, about 30 percent of companies are planning some kind of acquisition deal in the next year. That’s lower than one might expect to see, given the confidence level, but it’s several notches up from where we were just a few years ago.
It does appear that some companies are being more cautious about the mergers and acquisitions they do make, despite a few headline-grabbing instances recently (Dish Network Corp.’s $26 billion bid to purchase Sprint Nextel Corp., for example). Overall the value of corporate deals are still lower than what we saw at the onset of the financial dive back in 2007 and 2008.
The most likely industries to see deal activity are technology, consumer products, oil and gas, life sciences and automotive. Mining and utilities were among the least likely.
For smaller business owners, there may be even more reticence. Still, a merger or acquisition can be a smart move.
Some of the questions you’ll want to ask yourself include:
- Ask whether your business is ready. Usually, that involves questioning whether your company will be able to reach your growth targets internally. If not, it may be time to consider an acquisition.
- When screening companies, whittle down your selections by matching up the needs of your company to those that have the potential to lower your costs, improve your competencies, increase your revenue or expand your market share.
- Form a team of experienced advisers that will include accountants, investment bankers and skilled legal representatives. No matter how business savvy you are, there will inevitably be angles or elements you may miss. Having this extra insight will only serve to ensure the strong foundation of your new business venture.