Dealmaking has become a way of life and an essential skill for successful business owners. Even if you’re not actively looking to sell your company, raise capital or make an acquisition, you can’t afford to stay on the sidelines while others negotiate deals that can reshape the future of their business.
Through the first nine months of 2018, nearly $3.3 trillion was spent on global M&A activity, a record total that was up 39 percent over the same period in 2017, according to the Financial Times. Private equity firms still have more than $1 trillion of dry powder just waiting to be invested.
While deals such as Takeda Pharmaceutical Co.’s $62 billion acquisition of Shire Plc or Cigna Corp.’s $54 billion purchase of Express Scripts Holding Co. tend to grab the headlines, transactions are getting done across all sectors, including the middle market.
“M&A can be an important means for building scale, improving a target’s performance, or removing excess industry capacity, and can fuel long-term, profitable growth,” states a report from the Deloitte M&A Institute.
“M&A’s numerous potential benefits dictate that it be viewed as an important arrow in the corporate quiver; ready to be loosed when needed. However, companies should not wait until an attractive target is in view to sharpen their M&A capabilities. Proactive planning can improve the odds of hitting a strategic bullseye.”
This is good advice, even if you’re not the head of a $5 billion company like Frank C. Sullivan, who has made more than 100 acquisitions since becoming CEO at RPM International Inc. in 2002.
Dealmaking is a byproduct of a comprehensive growth strategy that empowers your team to play a key role in the deals you pursue.
Once the right team is in place and negotiations begin, Sullivan says it’s natural to want to close every deal. That doesn’t always happen, however. Deals are going to fall through whether you’re a big company or a business trying to boost its standing in the middle market. His advice for any business leader is to stand your ground.
“My father taught me to not seek the lowest price possible, but to offer a fair price — the highest price RPM could afford. If that amount isn’t acceptable to the seller, then we walk away from the deal,” Sullivan says. “You can’t be clouded by emotion. This approach has enabled us to win many deals over the years and has saved us from some potentially bad ones as well.”
Sullivan also believes strongly in using advisers who have specific M&A experience. While legal and accounting advisers can provide critical counsel in their areas of expertise, dealmaking requires a unique approach. Bringing this knowledge into the equation can help you make a better deal, or walk away from one that isn’t right for you.
Bottom line, there’s never been a better time to get in the game and become a dealmaker. Just make sure you have the right strategy to do it well. ●
Fred Koury is president and CEO at Smart Business Network