{"id":4831,"date":"2013-07-18T23:12:40","date_gmt":"2013-07-19T03:12:40","guid":{"rendered":"http:\/\/planfoundations.com\/?p=3480"},"modified":"2013-07-18T23:12:40","modified_gmt":"2013-07-19T03:12:40","slug":"tips-for-successful-small-and-midsize-ma","status":"publish","type":"post","link":"https:\/\/pioneerbusinessventures.com\/nsite\/tips-for-successful-small-and-midsize-ma\/","title":{"rendered":"Tips for successful small and midsize M&A"},"content":{"rendered":"

With market heating up, knowing the target industry is key.<\/span><\/strong><\/p>\n

The past few years were the perfect time for Joe Covey and Matthew Davidge to go on a buying spree at their media company, Interactivation.<\/span><\/p>\n

In 2008, when many investors were retreating to the sidelines of mergers and acquisitions, the partners snapped up Mag Rack, a video-on-demand network offering shows on topics such as cooking and pet care, from Cablevision. The following year, they bought Concert.TV, another VOD network, from an investment group and flipped it. Finally, they scooped up The Newborn Channel and The Patient Channel from NBC in 2010.<\/span><\/p>\n

Most of Interactivation’s transactions are in the $1 million to $10 million range. Its founders remain on the lookout for other deals, and for a simple reason.<\/span><\/p>\n

\u201cIt’s lucrative,\u201d said Mr. Covey, a technology and media entrepreneur. He and Mr. Davidge, formerly a management consultant at Bain & Co. and strategy consultant at MTV, are their own financiers.<\/span><\/p>\n

Smaller dealmakers such as Interactivation, which has grown to 30 employees from three in late 2008, are likely to face heightened competition, however.<\/span><\/p>\n

Dow Jones VentureSource recently cited one indicator of more movement in M&A: Buyouts of venture capital-backed companies rose to $1.9 billion in 2010 from $1.1 billion in 2009, while the median price of transactions rose to $46 million from $27 million.<\/span><\/p>\n

\u201cThe fourth quarter surprised everyone with how hot it was,\u201d said John McAdam, managing partner at Pioneer Business Ventures, a consulting firm with offices in Manhattan and Lambertville, N.J. M&A activity seemed to slow slightly in the first quarter but is \u201cpicking up again,\u201d he said.<\/span><\/p>\n

With more players getting into the game, companies must act on purchase opportunities quickly. Here are some tips on identifying and doing deals from entrepreneurs who have made small and midsize purchases recently.<\/span><\/p>\n

1.Hunt for leftovers<\/strong><\/span><\/div>\n
\n

Interactivation seeks out small properties that no longer fit the mission of the parent, usually a large media company. Many predict that M&A will heat up further and that \u201cthere will be opportunities for companies like ours that look for little scraps that may be a byproduct of a bigger acquisition,\u201d Mr. Covey said.<\/span><\/p>\n<\/div>\n

2.Look for inefficient businesses<\/strong><\/span><\/div>\n
\n

To establish strategic locations, In10sity Interactive, a New York-based Web marketer, has made five industry-related acquisitions in the past two years. CEO Ross Croley says he targeted companies that were doing something wrong\u2014overspending or operating inefficiently, for example\u2014that could be corrected by applying In10sity’s business model.<\/span><\/p>\n

Determining how to make money with such a deal takes careful due diligence, Mr. Croley said. \u201cYou really have to understand their business,\u201d he said, adding that he learned about some acquisition candidates through business brokers.<\/span><\/p>\n<\/div>\n

3.Stay connected<\/strong><\/span><\/div>\n
\n

Battered by the past few years, many companies are open to merging or being acquired as a survival tactic. Networking and keeping in touch with brokers can allow buyers to jump on such openings.<\/span><\/p>\n

\u201cWe’re always looking,\u201d said Glenn Friedman, managing partner of The Metis Group, a New York-based CPA firm that has picked up about 10 accounting practices. \u201cWe’re certainly talking to other firms right now. If the right thing comes along, we’ll pursue it.\u201d<\/span><\/p>\n<\/div>\n

4 .Act fast<\/strong><\/span><\/div>\n

There’s a lot of tire-kicking in M&A, observers say. To help Interactivation prevail against bigger, more well-heeled bidders, Messrs. Covey and Davidge home in on properties they’re serious about buying. They offer a fair price\u2014though it may not always be the highest\u2014and more important, they commit to doing the deal within six to eight weeks. That’s a far shorter time frame than the typical six to eight months.<\/span><\/p>\n

Mr. Davidge shared his pitch to clients: \u201cIf you want to sell this asset next week and close on this acquisition by the end of the month, we are the only company that is going to do that.\u201d<\/span><\/p>\n

Running a flat operation and knowing the target industry allow Interactivation to pull off its strategy. The partners have found ways to simplify the vetting process, which they couldn’t do if they were part of a corporation with layers of management. They take the usual steps, such as checking out customer and vendor agreements, and reviewing financials. But, for instance, they may choose not to send hundreds of nearly identical contracts for different clients to their lawyer for individual approval.<\/span><\/p>\n

If progress slows, Interactivation’s executives will schedule a personal visit to the seller’s office to move things along. <\/span>
\u201cMaybe that’s a different approach from a big-shot banker, who sends minions or does a teleconference,\u201d said Mr. Davidge. \u201cEven in this fast-paced world, there’s still a lot to be said for shaking hands an<\/span>d drinking a cup of coffee together.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

With market heating up, knowing the target industry is key. The past few years were the perfect time for Joe Covey and Matthew Davidge to go on a buying spree at their media company, Interactivation. In 2008, when many investors were retreating to the sidelines of mergers and acquisitions, the partners snapped up Mag Rack, […]<\/p>\n","protected":false},"author":1,"featured_media":3482,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[14],"tags":[11,15,17],"class_list":["post-4831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-john-j-mcadam-blog","tag-business-planning","tag-marketing","tag-strategy"],"_links":{"self":[{"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/posts\/4831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/comments?post=4831"}],"version-history":[{"count":0,"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/posts\/4831\/revisions"}],"wp:attachment":[{"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/media?parent=4831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/categories?post=4831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pioneerbusinessventures.com\/nsite\/wp-json\/wp\/v2\/tags?post=4831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}