What is a “Deal Ready” Company?

By Ken Taormina

There are many good articles and papers on what a Deal Ready company is available on the internet.  What I want to focus on is my experience and our firm’s experience on the reality. Using a few examples of real live clients (both sellers and buyers) of what is not a “Deal Ready” company and how one that is not can be turned into one that is. 

The reality is most middle market companies that buyers target have not participated in a sale or an acquisition. The owners (Founders, Partners or Family) have been spending most of their time focused on their business and making it grow. Their knowledge of M&A is through colleagues or hearsay at the country club.

Founders tend to have very strong egos that are needed to build a company from scratch, so they have not always built strong teams with leaders in key positions (Sales, Finance and Operations) who are ready to move up if they are acquired. There are seldom meaningful succession plans in place. Consequently, when buyers are determining their interest, especially PE firms who don’t usually have the key people to replace the leadership, they insist on longer earn-outs and less cash up front in the deal. This then meets big egos with high expectations and little real-world perception of a company’s true value. 

One company I acquired, a combination Aerospace Software and Products Manufacturing firm, had a strong CEO but he was also the key Sales Executive that held all the relationships with the firms that provided 80 percent of the company’s revenue. The Finance Chief was a glorified bookkeeper, and this was a company doing 12% EBIDTA and had substantial revenue and growth. This not only affected our view of offering a lower valuation but also allowed us to tie the founder down to a 3 year stay and a 3 year earn-out when it could easily have been a year earn-out and a year stay in his role during transition. 

A similar firm in Cyber Security had prepared for several years for an exit. The CEO and Co-Owner had built a strong team with an experienced President, CFO and VP of Sales.  He had developed a flat organizational structure with a strong succession plan that was clearly delineated during pre and post due diligence. The books of the firm were audited yearly by a CPA firm.  The overhead of the firm was kept low, and the pipeline of new business was 3x current revenue, and the backlog was 3 years of revenue with a predictable recurring revenue and happy clients. The EBIDTA was 14% and there was $2m of cash on hand and no debt. This was a very easy and quick acquisition because the leadership took the time and effort to prepare themselves for an exit well in advance. Certainly, “Deal Ready”.

Another mid-market company was family owned, had awards and many long-term satisfied Fortune 1000 clients with recurring revenue. However, they didn’t have auditable books, working accounts payable, an accounts receivable system or a compliant inventory. They were an excellent firm, but the family had left the management of the firm to incompetents.  

When we got involved it was clear that all the problems were fixable, but they would not be selling the firm any time soon. After 1 year and a new competent CFO was hired, they put in place a formal accounts payable process, regular accounts receivable collection with KPI’s and a full audit of Inventory which cleared up $1.5 M in missing inventory. Other key items such as renegotiating their debt, hiring an experienced Sales VP in their industry, building a succession plan for CEO and COO and outsourcing part of their service team took them from 5% EBIDTA to 12% EBIDTA and ready for sale or a buy out from their two sons. This company was then “Deal Ready”.

For Sellers to maximize their valuation this is a list of the key areas they must focus in on early for success.

·      Strong Organizational Structure and Governance

·      Strong Talent and a good retention plan for key players

·      Auditable Books

·      Recent Independent Valuation of the company

·      Strong planning, budgets and KPI measure for the business

·      Documented Process for the operations of the business

·      Good control pf AP/AR and Inventory

·      Technology upgraded IT and an up-to-date Cyber plan

·      Strong Advisors in M&A, Law, Banking, Tax, and Consultants

·      Deep Brand Exposure in your Industry both in networking, clients, on-line presence

All of these key actions when ready will lead to a much easier search for a buyer, multiple potential buyers, a swifter due diligence and a successful sale with a higher valuation for the Seller.  A true “Deal Ready” company.

Cortland Adds 5 New Advisors; Expands into Denver, Jacksonville and Billings, MT

FOR IMMEDIATE RELEASE

11 February 2022 

MIDDLEBURG, VA (Feb. 11) --- Cortland Advisors, LLC, a growing Mergers & Acquisitions advisory services firm that specializes in the middle market, today announced it has expanded into four new regional markets and has signed five new highly experienced advisors.

“I’m pleased to announce we are adding five new and amazing people to our already deep team of advisors,” said Adrian Logue, CEO of Cortland Advisors. “Besides helping our capabilities in Government Contracting, Aviation/Defense and Real Estate Development, these new advisors also help us expand into three new regional markets.”

New Advisors:

·      Paul McQuillan - Washington, DC

·      Dr. Joe Durzo, P.H.D. - Denver, CO

·      Erin Cluff (USAF Col., retired) - Billings, MT

·      James Cluff (USAF Brig. Gen., retired) - Billings, MT

·      Seth Deyo - Jacksonville, FL

“With the growth of our company over the last three years, we thought it made sense to add to our already strong bench,” said Logue. “These new advisors are not just seasoned operators and businesspeople; they are also world-class experts in their particular industry segments. 

“Cortland is now strengthened in its core Government Contracting/Defense business with Paul McQuillan, Cliffy and Erin Cluff,” Logue added. “Joe Durzo brings a lifetime of accomplishments to our expanding Real Estate/Construction team. And Seth Deyo has a strong accounting and finance background in M&A as an experienced former CFO.”

About Cortland

Cortland Advisors, LLC, is a mid-market, international M&A Consulting firm headquartered in Orlando.  Cortland specializes in both buy- and sell-side transactions in the $20-100MM revenue range.  Founded in 2013, Cortland has subject matter experts who work in various industry segments including Technology and Software, Government Services, Engineering Services, Telecommunications, Automotive, Media, Biosciences and Financial Services.  

Contact:

Randy Coppersmith

Chairman, Cortland Advisors

rcoppersmith@cortlandadvisors.com

# # #

Cortland Assists Dykstra Construction in its Sale to JF Petroleum Group

FOR IMMEDIATE RELEASE:

11 February 2022

Cortland Assists Dykstra Construction in its Sale to JF Petroleum Group 

Plant City, FL (Feb. 11) --- Cortland Advisors, a leading merger, and acquisitions advisory firm, is pleased to announce the sale of its client Dykstra Construction, to JF Petroleum Group. The private transaction closed on February 7, 2022.

Founded in 1999, Dykstra Construction is a commercially certified, multi-industry contractor specializing in commercial and convenience store construction and petroleum equipment installation and repair serving a strong customer base of national brands including RaceTrac, Dollar General, Exxon Mobil, and 7-Eleven. Dykstra Construction is widely recognized in the state of Florida for its exceptional quality, expertise in fuel system design and installation and general contracting.

JF Petroleum is a leading provider of turn-key distribution, construction and service solutions to the North American fueling infrastructure industry.  The company serves retail fueling stations, commercial and government fleets, and emergency power customers across the United States.

Among its many attributes, Dykstra Construction’s leadership position in the petroleum industry was of great interest to JF Petroleum Group. With this acquisition, JF Petroleum Group expands its services footprint in the Southeastern region of the country.

“Given the growing demand for construction services throughout our Southeast and Gulf Coast Regions, this acquisition will significantly enhance our ability to provide best in class turnkey construction solutions to our customers,” said Keith Shadrick, CEO of JF Petroleum Group.

With the transaction complete, Dykstra Construction’s Darry Dykstra will stay on with JF Petroleum Group in a senior leadership role.

“Cortland’s M&A team did a great job,” said Dykstra. “They were with me all the way. I can’t say enough good things about Cortland. At this point, I’m just relieved the deal is over. I really appreciate everything Cortland did.”

“We are pleased to get this transaction done for our clients,” said Adrian Logue, CEO of Cortland Advisors. “We’re very happy for Darry and Heather. We think the combination of Dykstra Construction and JF Petroleum Group is a great match. From the start of our acquisition discussions with the Dykstra team, it was clear that there was a high level of interest to get the right deal done,” said Logue.

About Cortland Advisors

Cortland Advisors is a Mergers & Acquisitions Advisory Services firm that specializes in transactions between $20-100 mm. Cortland makes a market in several industry verticals including IT, Government Contracting, Software and Commercial Construction Services. Cortland offers full-service transaction support, including M&A Advisory, management consulting and strategic planning.  Visit the firm’s website to learn more: www.cortlandadvisors.com.

Media Contact
Randy Coppersmith
rcoppersmith@cortlandadvisors.com

### 

From Sportswriter to M&A Advisor

By Cheryl Meyer

December 2, 2021 courtesy of Axial.com

It’s a big leap from being a journalist and a public relations executive to a mergers-and-acquisitions consultant. Or is it? 

Randy Coppersmith, the chairman of Cortland Advisors, LLC, an M&A advisory firm based in Florida, says his writing and communications experience, along with his people skills learned from years of reporting and PR work, have helped him deal successfully with buyers and sellers in his current gig.

Coppersmith’s path to M&A advisor was a series of twists and turns, with doors opening as he went along. His career began after he graduated from the University of South Florida with a bachelor’s degree in Journalism and Mass Communications. His dream at that time, he admits, was to be a newspaper writer, which he readily accomplished. Coppersmith worked for six years as a writer for numerous news outlets: The Associated Press, The Tampa Tribune, the Springfield Daily News (in Missouri), and the Sun-Sentinel (in Florida), covering sports, news and politics — until he was offered a PR post at IBM Corp., where he got his first real taste of deal making. Five years later, Edelman, the largest independent public relations firm in the world, stole him away, offering him a senior vice president slot. As the years went by, he also held a few other senior communications positions, including at AOL Studios, a division of America Online, Inc., where acquisitions were key to the company’s growth strategy. 

In 2002, Coppersmith shifted radically and became chairman and CEO of Intercom Consulting & Federal Systems, a government contracting company based in Virginia. He helped grow the business significantly over the next 14 years until it was acquired by Belcan, LLC, in 2016. Then in 2017, he joined Cortland. He is now based out of Cortland’s Washington, D.C., office.

Today, Coppersmith has more than 60 sell-side and buy-side transactions under his belt, and as chairman, helps his firm on small- to mid-market transactions, typically working with companies that generate under $100 million in revenue.

Axial recently spoke with Coppersmith about his 44-plus-year career, his firm Cortland, the M&A market, and what he’s learned along the way.

You took an usual career path to get where you are today. How did these transitions occur?

RC: I always wanted to be a newspaper man as long as I could remember. I worked for my high school newspaper and my college newspaper. But when IBM called and offered me a job in New York, at the time Elizabeth and I were expecting our first child, and it was a great opportunity for a career. I did speechwriting, magazine editing and product public relations, and I loved IBM. It was one of the saddest days of my life when I left, but (Edelman’s CEO) Richard Edelman offered me a great opportunity and I took it. At AOL, we did over 50 transactions while I was there, and that’s one of the ways we built up the company, acquiring Netscape [Communications Corp.] and a lot of other content and technologies. 

What have you learned about the M&A field?

RC: It’s great to be adroit at financial modeling, but we also need people who have liberal arts backgrounds, and who understand the power of the written word and can communicate effectively. For me that’s been an advantage. I’m not a traditional banker. And I think having deep knowledge of sales helps, too.

What do you find most challenging about M&A advisory work?

RC: One, getting private equity firms to alter or shift their models to meet the demands of the marketplace. A lot of PE firms have a financial business model — “this is what we need to make on this deal” — and as an investor, I appreciate that. But I would like to see more flexibility from the private equity folks, especially in this time when there is so much competition. 

Two, getting sellers to really agree that they want to sell. We’ve had some transactions where we got to the alter and the marriage did not get consummated because the seller got cold. It’s a lot of work for nothing. It’s not great for anybody. 

The third thing — and this is an observation of mine — is that the government is making an egregious mistake in not increasing the size of the small business set-aside status to $100 million. Most government contracting firms are judged on the total size of all their contracts, and the small business set-aside ceiling for most of those firms is usually around $30 million to $35 million. Above that they are considered a large contractor, and as a consequence it has a chilling effect on a lot of M&A transactions in the space. A $25 million government contractor wants to buy another $25 million contractor, but it will turn them into a $50 million consolidated business, so they’re automatically disqualified from competing for small business set-aside work. If the government would raise the small business ceiling to $100 million, it would precipitate a lot more business in the GovCon M&A space. I hope some friends at the SBA are reading this.

What do you find the most rewarding about M&A work?

RC: When a company is sold and principal shareholders get paid, that’s a tremendously rewarding experience. It’s also rewarding to see entrepreneurs exit and fulfill their dreams. We have a client who had an $8 million business, and in five years he’s turned it into a $70 million company. We will work hard to help him get his firm acquired in the next year. He’s going to make a tremendous amount of money, and this is what he set out to do. If he can do it, why not? 

You’ve been involved in dozens of M&A deals throughout your career. Which ones stand out?

RC: There are a lot of them. In the early days with IBM, I worked on the transaction for ROLM [Corp]. I supported the IBM team in due diligence, post-transaction, promotion, marketing, and team structuring. It was the first transaction in my career, and my first time seeing how it worked, watching a buyer acquire a large but much smaller business. I also worked on a number of transactions at AOL, including business development opportunities with The Walt Disney Company and the ABC television network. One more was the sale of Intercom Federal Systems, which is how I got to Cortland. Cortland advised the private equity firm’s portfolio company, Belcan, which acquired my company. Since coming to Cortland, we’ve done a number of deals, including the sale of a software company in Texas, and we recently completed the sale of a research company in Washington, DC, to a larger research company. Now, we’re working on a construction deal that should close in the next couple of weeks. 

How has M&A work changed over the years?

RC: In the 40-plus years I’ve been doing this, the business has become way more complicated in terms of lawyers and accountants. Accounting firms representing the private equity companies can sometimes make a transaction overly complex . And that’s why it’s important for business owners to hire someone like Cortland — so they have someone represent their best interests in these talks.  M&A is more popular than ever, and private equity has become a “gi-normous” component in the financial services industry, much more prevalent than it was 20 years ago. In fact, recently a study found that 40% of CEOS are considering an M&A transaction as a way of growing their companies.

Cortland focuses primarily on three areas: construction, technology, and government services. What do you see in these three sectors as we head into 2022? 

RC: Certainly, we see more of the same for construction. There’s still a chronic shortage of inventory for housing and we may see some conversion of commercial properties into residential houses. So, we don’t see a slowdown in the short term. What will slow construction down is an increase in interest rates, but even at 4% next year, we’ll see plenty of M&A action. The infrastructure bill is also creating a trillion dollars’ worth of opportunity.  Technology continues to be very strong. We don’t see any slowdown in technological use — if anything, it’s continuing to increase. And we think government contracting will continue to be very strong into the foreseeable future. We like the verticals we are in. 

Construction in particular is a hot market right now. Why do you think that is?

RC: It’s a combination of things. There’s a tremendous amount of capital available in the market today. In my 44-year career, I’ve never seen anything like this. People are looking for assets to invest and frankly, the pandemic has made a lot of people re-evaluate their lifestyle, and how they want to conduct business from home. They want to get out of the city, so it’s a whole combination of things at the right moment at the right time. And interest rates are at near historic lows, so private equity, family offices, and institutional investors are all looking for deals because they can finance them readily. 

How would you describe an ideal client? 

RC: Obviously we like companies with strong balance sheets, strong customer relationships, and strong management teams. It’s important that all the owners of the business — and many of these businesses have multiple owners — agree that this is what they want to do. You’ve got to get everybody on the same page. 

How do you connect with buyers and sellers eager to do deals?

RC: We work with accounting firms, law firms, banks, and wealth management firms that refer business to us. Almost all of our work is referral. Believe it or not, customers are often a great source of new business referrals. We don’t do any kind of cold calling. Our buy-side practice is very busy. But the majority of our current book are sell-side engagements. We’re constantly talking with private equity buyers who are hungry for deals. 

How do you handle clients who are first-time sellers?

RC: Pretty much everyone who works at Cortland has been there and done that. Almost all of us are ex-CFOs, CEOS, attorneys, CPAs, and have been involved on both the seller and buyer sides. There’s a lot of coaching, hand holding, pop psychology — and we help them find the benefit of this for themselves and their family. We have them sit down with a wealth advisory partner and figure out what the magic number is for them to retire. The magic number to retire is often less than what they think their company is worth, which makes it a lot easier to go forward with a deal. 

What makes a great M&A advisor?

RC: They understand the transaction economics, the financial component of it. They understand the sales and marketing component of it. You have to sell the buyers on these deals. You’ve got to be able to deal with the clients and all of their staff issues accordingly, and you’ve got to be pretty good at finding new clients.  It’s rare to find someone who can do all of that. If you find that person, grab ’em. Or call me — we’ll hire them.

What advice would you give to buyers or sellers looking for a deal?

RC: First of all, it’s the fool who represents themselves as a client. I can’t say it any more plainly. If you are a dentist, you wouldn’t operate on yourself. If you’re a lawyer, you wouldn’t represent yourself in court. It’s just silly. The truth of the matter is, not only do we earn our fees, but we increase the value of the transaction and that increase almost always covers our fees. It’s just smart to hire a professional M&A advisor. And we like to work with smart clients.

Source:

https://www.axial.net/forum/from-sportswriter-to-ma-advisor/

Economic growth helps cut fiscal 2021 deficit to $2.8 trillion

Budget shortfall drops amid surge in tax receipts, slower-than-expected spending on pandemic aid programs

By David Lerman

Posted October 22, 2021 courtesy of RollCall.com

Surging tax revenues as the U.S. economy rebounded from the coronavirus-driven downturn helped reduce the budget deficit for the fiscal year that ended Sept. 30, the Treasury Department and White House budget office announced Friday.

The fiscal 2021 deficit clocked in at a still-massive $2.8 trillion, although that’s down $360 billion from the previous year’s shortfall and it’s $897 billion less than the Biden administration predicted in February.

Before the COVID-19 pandemic, a $2.8 trillion deficit would have sent shock waves through Capitol Hill, where fiscal hawks had expressed alarm at trillion-dollar shortfalls. But the modest decline from a $3.1 trillion fiscal 2020 deficit reflects renewed optimism that the worst days of the pandemic are in the rearview mirror.

“Today’s joint budget statement is further evidence that America’s economy is in the midst of a recovery,” Treasury Secretary Janet L. Yellen said in a statement, calling the better-than-expected numbers “a direct result” of the administration’s COVID-19 management and a big aid package enacted in March.

The decline from the previous year’s shortfall was due partly to a surge in federal revenues. Tax receipts, which swelled past $4 trillion, reached their highest level as a share of the economy in 20 years. Revenue exceeded White House budget estimates by $465 billion.

And corporate tax revenue surged to almost $372 billion, topping the previous high reached in fiscal 2007. Officials attributed the overall revenue gains to increases in business and personal income from a rebounding economy, pandemic relief and the vaccination rollout.

Federal spending grew to a whopping $6.8 trillion in fiscal 2021, a 4.1 percent increase from the previous year’s level. But that total was still $431 billion below the White House budget forecast, partly because of delays in spending pandemic relief money.

Total federal borrowing from the public increased by less than the amount of the deficit because Treasury drew down its huge cash balance built up in the pandemic's early days. As a result, debt increased by $1.3 trillion last year, down from $4.2 trillion in fiscal 2020, when Treasury sold huge amounts of short-term debt to finance pandemic relief and grow its cash stockpile to cover emergencies.

As a share of the economy, borrowing from the public fell slightly from 100.3 percent of gross domestic product at the end of fiscal 2020 to 99.5 percent last year.

The Treasury’s official calculation of the fiscal 2021 deficit was in line with the Congressional Budget Office’s Oct. 8 estimate. In July, the CBO estimated that the deficit would be $3 trillion; the White House in August updated its February forecast, predicting a $3.1 trillion shortfall.

For the current fiscal year, the White House budget office estimates that the deficit will drop to $1.5 trillion, a little higher than the CBO’s $1.15 trillion forecast, as pandemic relief fades. Both projections show deficits declining through mid-decade before starting to rise again because of growing costs of health care programs and benefits for seniors as well as interest payments on the debt.

The baseline projections don’t take into account changes in the economic situation or new legislation that’s working its way through Congress.

The latter includes a bipartisan infrastructure bill that’s estimated to add $256 billion to deficits over the next decade and a budget reconciliation bill that’s still being negotiated. That measure is expected to add tax cuts and new spending totaling no more than $2 trillion; top Democrats say it’ll be fully paid for, but it’s not yet clear what “score” the CBO will give the still-unfinished legislation.

Cortland Advisors Ranks on Axial’s 2021 List of Top 50 Middle Market Business Services Investors & M&A Advisors

New York (July 20, 2021): Cortland Advisors has been recognized on Axial’s 2021 Business Services Top 50. The award acknowledges the most active and successful Mergers & Acquisitions firms based on the number of business services deals marketed through the platform and how many "pursuits" those deals generated. Axial ranked Cortland 22 on the M&A Advisors List.

“We were delighted to learn Cortland is now among the leading M&A Advisory firms in the United States focused on the mid-market,” said Adrian Logue, CEO of Cortland Advisors, LLC. “There are literally thousands of M&A firms in America. To make this list is a great achievement. It’s also a recognition of our people, who are among the finest professionals in the industry.”

The award, issued by online Financial Services provider Axial, helps to measure the number of business services deals tracked by Axial’s online platform. Many M&A firms utilize Axial as a means of tracking new client information or to research potential acquisition targets. 

“Our team at Cortland uses the latest in search and data analytics data,” said Logue. “Axial helps us provide the most current and useful information possible to our clients. It is among a broad number of analytical tools Cortland uses.” 

Methodology

Axial’s Top 50 Business Services list was generated based on a weighted formula leveraging private transaction data from the Axial platform. Metrics in the formula include the number of business services deals brought to market via Axial (sell-side), how much interest those deals generated from Axial’s buy-side member base (sell-side), the number of specific business services-focused investment mandates created in the platform (buy-side), and the number of business services deals that progressed through the deal funnel achieving an executed LOI or successfully consummated transaction (buy- & sell-side).

Cortland Advisors is one of over 3,500 advisory firms and 1,800 corporate and financial buyers have joined Axial to efficiently connect with relevant capital partners, source actionable deals, and build new relationships.

About Cortland Advisors

Cortland Advisors is a Mergers & Acquisitions Advisory Services firm that specializes in transactions between $20-100 mm. We make a market in several verticals including IT, Government Contracting, Construction Services and Software. Offering an array of services, including M&A Advisory, operational consulting and wealth advisory services, Cortland Advisors are your middle market transaction experts. 

Visit us at our website to learn more: www.cortlandadvisors.com.

About Axial

Axial is the largest platform on the internet for buying, selling, advising, and financing private companies in the middle market ($5-$250M TEV). Over the last 10 years, Axial has established a single, well-known platform that business owners and deal professionals trust to discover and connect with new transaction partners.

Why 2021 M&A Activity Is So Strong… And What It Means To A Business Owner

A CORTLAND ADVISORS LETTER TO OUR CLIENTS AND FRIENDS

Cortland’s obligation to our clients is to align all the factors that drive overall enterprise value, which is why we constantly watch the market and track what buyers are doing and what they are looking for.

Our job is to educate our clients on the internal and external factors that determine valuation. When it comes to selling a business, timing matters.

The Reasons for Record M&A Activity in 2021

Buyers have money

Financial buyers (private equity firms & family offices) have capital. The disruption in 2020 delayed deals. Now, buyers are scurrying to place capital. There is uncertainty about 2022, so activity is high right now.

The same dynamic holds true for strategic buyers. Those with an acquisition strategy and the cash to do deals were stymied in 2020 and are now aggressively seeking opportunities.

Potential Tax Changes

Capital gains tax increase coming? Big factor when timing the exit from your company.

Owners must weigh the pros and cons of growing the business for 2-3 more years versus selling now when the market is strong and tax treatment is manageable. Now is the time to seek advice from tax and transaction professionals.

Low Interest Rates

Buyers can increase borrowing capacity due to very low interest rates. This translates to premium prices for well-run, healthy businesses.

Owner Risk Mitigation

There are always risks associated with running a company. Some are within the control of the owner, others are not. What happened last year was a wake-up call for owners. Major disruption from an external source is a scary proposition, causing owners to re-think everything, from supply chain to customer retention to labor. Some owners have doubled down and plan to stay the course. Others are looking to convert their hard-earned equity into wealth through a transaction with a buyer, whether it be a 100% or partial sale. Taking on an investor/partner to reduce debt and to execute a growth strategy is a good way to de-risk and hold equity that can increase over time.

SUMMARY

Business owners are advised to think beyond their personal timetable when it comes to a transaction. The most successful transactions occur when a healthy business intersects with a strong market. 2021 is fast becoming an environment for record deal flow. Owners are advised to consider their options and determine if there is an opportunity to capitalize on today’s active deal environment. 

How can Programmatic M&A Lead to Faster Growth?

How can Programmatic M&A Lead to Faster Growth?

March 29, 2021

By Ken Taormina

I have found when business executives, business owners, and investors hear about Mergers and Acquisitions they think of huge scale deals.  The ones that make the business headlines in the Wall Street Journal, The Economic Times, CNBC, and Bloomberg.  They are big, global and exciting.  Unfortunately, what most don’t realize is that many large-scale Mergers fail to achieve most if not any of their financial business objectives.

The litany of failed large-scale deals includes AOL-Time Warner, Sperry and Burroughs into Unisys, Daimler with Chrysler, Quaker and Snapple, Sears and K-Mart, eBay and Skype, Bank of America and Countrywide to name only a handful.

Many great companies that are successful at growing their business, both large and mid-market follow a Programmatic or Progressive M&A approach to deals.  They have learned that big deals often are not worth the risk versus the reward. They do not focus on achieving great scale which makes these Mega Deal deals incredibly complex and difficult due to myriad Integration issues related to Culture, Systems, Marketing, Business Mix and Geography.  Instead, they focus on buying companies that allow them to expand their product or service lines, enter new geographies or increase their business efficiency. This is Programmatic M&A.

Companies that have been incredibly successful doing so are Accenture, CISCO, Microsoft, Oracle, but in my experience this can and is one of the fastest ways for a mid-market companies to grow.

Most Mid-Market Companies basically have three ways to grow revenue and market share:

• Organic (My experience is it is slow and steady at best)

• Partnership, Joint Venture, Licensing, Strategic Alliance (Complicated and they take time)

• Small Acquisitions (If focused on a specific objective on Rev Growth, New Markets, Product Diversity they can be fast and easier to integrate)

I have helped many mid-market companies double and triple in size with a smaller focused acquisition.  While at Accenture in Europe, we targeted and acquired a $7m Revenue Automated Pricing Optimization Company with a founder and 25 employees.  We closed the deal and used our Market Presence and Sales capability to position them in Germany and in the US in Detroit. Because they were well run, focused and had a class leading product and service offering in Automotive, we were able to grow them to $45M in Sales after 1 year.  Integration was simple and we kept all the people including the Founder.

Accenture would go on to do many deals since 2011 buying small, focused companies that grew their Digital Marketing Business from a small business to a world leader challenging traditional Global stalwarts in Marketing.  In Connected Cars, Digital, Procurement, Industry 4.0 the company used Progressive and very Programmatic acquisitions of $1.5Billion a year to grow the company to the Giant it is today in all of these dominant new fields. Many of these acquisitions were under $100M.

In the M&A, Bigger is not always Better for most companies. A targeted, strategic, well thought out growth plan tied to focused goals with very specific targets and KPI’s will return much more on a company’s investment.