Scoring with Strategic Buyers - Take Advantage of a Resurging M&A Market

Following several years of stormy weather, the sun is
finally beginning to emerge, albeit slowly, on the M&A
market. Many observers expect strategic buyers to be
major players in this recovery. That’s good news for
most business sellers, because strategic buyers
typically pay more than financial buyers.
Finding and negotiating with strategic buyers isn’t
necessarily going to be easy, though. Intense
competition among businesses that have been
waiting for the M&A market to improve, and that are
now entering the market, means that sellers must be
prepared to make a compelling case.
The new dealmakers
Strategic buyers choose targets based on projected
synergies and other factors that they believe will
contribute to their company’s long-term growth. And
they aren’t only the dominant players right now —
they’re pretty much the only players.
A study conducted by the Association for
Corporate Growth and Thomson Reuters found that
through Nov. 30, 2009, strategic M&A activity totaled
$1.7 trillion. Although this number represents a 32%
decline from the comparable period in 2008, it
accounts for 94% of announced M&A deals last year
— the highest percentage of strategic deals since
2001. Private equity funds traditionally make up the
bulk of financial buyers, which choose their
acquisition targets based on economic value. But
scarce financing and poor investment returns have
kept most of these buyers out of the market in recent
years. Strategic buyers, on the other hand, tend to be
more financially stable and often have the capital
needed to make cash deals. They also don’t face the
same time pressures as financial buyers, who
typically look for temporarily undervalued targets that
can be bought relatively cheaply.

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