By Dom Leighton and Gareth Molloy, Investors at Livingbridge
Optimism has been gradually returning to the UK mergers and acquisitions (M&A) market in recent months. The last year has seen a significant uptick in SMEs considering the sale of their business, and high-quality assets with clear growth strategies are fetching strong valuations, signalling increased confidence among buyers.
M&A offers myriad opportunities for SMEs looking to scale their businesses and achieve sustainable growth across market cycles – be it by entering new markets, accessing new technologies and expertise, or capitalising on economies of scale.
However, in today’s competitive landscape, companies need to approach buy-and-build strategies with increased discipline and care; ensuring that value is being added for clients, customers, and shareholders, and is more than just the sum of the parts.
While there is no one-size-fits-all approach, here are the top considerations for businesses looking to navigate M&A successfully:
- Focus on Quality and Strategic Fit
Ensuring that every acquisition will actively drive value is key. It’s vital to ensure that any acquisitions fully align with your strategy. It’s easy to get caught up in a deal but you need to stop for a moment and reflect on its merits once you have all the information. After going through this process, you might find that you need to pivot or triage more companies, and that’s fine.
- Consider the Impact on all the Stakeholders of a Target Company
Too often, M&A strategies overlook the impact of acquisition on a company’s customers and employees. In our experience, it’s really important to emphasise why being acquired will be better for all stakeholders. Key points include new opportunities for employees, expanded market access, and increased stability for the acquired company.
Another key point to highlight, is that the acquisition is likely not the end in terms of value/exit rewards for the shareholders. Many founders view selling as a complete exit, but that’s not always the case. Some structures provide founders with further upside, unlocking future value that they wouldn’t have achieved standalone.
- Ensure Cultural and Strategic Alignment
Cultural fit and shared vision are essential for a successful acquisition. Once you’ve found the right company, the real challenge is ensuring everyone is aligned on the vision. This alignment is crucial from day one – it helps avoid potential roadblocks during integration and ensures everyone is working toward the same goals. Investing time upfront to aligning on culture, vision, and strategy, means companies can prevent challenges post-acquisition and ensure a smoother transition.
By focusing on these three, crucial elements of the journey, business owners can ensure that acquisitions not only add immediate value, but foster sustainable growth in the future.
It’s essential to consider the broader impact of a deal – not just on the financial bottom line, but on all stakeholders. When executed with care and precision, M&A can serve as a powerful tool to unlock new growth trajectories, mitigate risk, and propel SMEs forward in a competitive and ever-evolving market landscape. As confidence returns to the market, those who approach these opportunities with discipline and strategic foresight will be well-positioned to achieve lasting success.