Merger & Acquisition

     Merger and acquisition is big business today.  We constantly hear of businesses and corporations that are bought by or merged with other businesses and corporations.  This seems to be happening with businesses of all sizes.  A teenager may start a lawn mowing business while in school.  With hard work the business grows and has value.  The business is sold to a competitor.  The competitor receives value in several ways.  The customers are the greatest asset.  The used equipment has value, and a competitor is eliminated.  New employees who are trained in the business may come with the acquisition.  New customers are acquired at a cost that is less than other marketing means.

     I occasionally work with business brokers in my consulting business.  Some business brokers work exclusively in merger and acquisition.  They find this to be the most lucrative segment of the business. 

     When a business broker takes a listing, the first place most brokers look for a buyer is among the competitors.  Buying a competitor can be an economical and efficient way to expand.  It is easier for the business broker because they do not have to explain the business to a new buyer that is not familiar with the industry.  The negative for people wanting to buy an existing business for the first time is that many businesses are never offered to the general public. 

     We hear a lot about mergers of major corporations in many industries.  I have mixed emotions about the merger of many major corporations.  Many airline companies have merged, like Northwest being merged into Delta.  Has the change been good or bad?  AT&T now has a goal of acquiring Direct TV.  This could change our communications options.  As leaders in any industry merge, new opportunities appear for new small competitors. 

     I have a big problem with the large mergers in the banking industry, their failures, and then the government bailouts.  I do not agree with the present government philosophy of bailing out companies that are Too Big To Fail.  If a company becomes too big to fail with a merger, that merger should never have been allowed.  We do have anti-trust laws in place to cover this situation. 

     Why do mergers make sense in business?  Mergers make sense financially because duplications can be eliminated.  That means people in many cases.  Competent and hard working employees may lose their jobs due to no fault of their own.  This is not good for the economy.

     Finding another job is not easy.  Self-employment can be a displaced worker’s best option.  I had a client that felt he would be let go after a merger.  We started to look for franchise opportunities while he was still employed.  He found the right opportunity to achieve his goals and waited to be let go.  The week after he received his notice and severance package, he was awarded the franchise, and he was in the next training offered by the franchisor.  I discuss this situation and more in my book, Business Fits; How to find the right business for you!

     Our government could learn a little from merger and acquisition in the private sector.  We have so many agencies and departments duplicating services that it is ridiculous.  Should we have a 50% Merger and Elimination at the federal level?  This may sound a little extreme, but I would be willing to bet most people would never notice the difference except for less government control, less taxes, and less government debt.

     Am I just wishing and dreaming again?