M&A

What is M&A?  Many business owners may not be very familiar with this term.  While many large business need mergers and acquisitions to effectively grow, this is not always the case in the small and medium-sized business world.  In the small and medium-sized business world, there is usually many ways to continue growing the business organically.  But, acquisitions, if used effectively, can be a fast way for small and medium-sized businesses to grow.  If these business buyers can buy the business for a low multiple and structure the deal effectively, a small business can buy their way to fast growth.  While this is often not the case, we do come across the occasional business buyer that can manage growth in this fashion.  Austin, TX is a good location to find fast-growing businesses.  With one of the best local economies in the country, Austin is home to one hundred to one hundred fifty people a day moving into the metro area.

For business sellers, M&A is one of the best ways to find the best buyer for their business.  Why is this?  For one, a buyer in the industry already knows the industry.  This can potentially make the deal go much easier than if the buyer is unfamiliar with the industry.  Also, theoretically, an industry buyer can pay more for the business than someone outside of the industry.  Since there are certain synergies that go along with combining two similar businesses, an industry buyer should realize some cost savings by buying a business in the same horizontal.  For instance, if there are overlaps within certain jobs, a buyer may only need one of those people within a certain management layer.  You may not need to heads of sales, you might only need one.  So, the cost savings from buying a business within the same industry can make for a faster deal for a seller and realize some cost savings for the buyer.