The M&A market has now had a few years of stability. Companies continue to make money and the underlying macroeconomic trends support higher levels of business confidence. Despite new healthcare regulations and calls for higher taxation in Washington, most business owners are heading into 2014 with a few good years under their belts and increasing optimism. Many companies are ramping up business acquisition opportunities in 2014 as a way to increase their growth. There are a number of reasons why companies are doing this. Firstly, interest rates continue to be at historically low levels and loans are widely available. Strategic business acquisition can be easily financed at low rates. Acquisitions continue to represent the best way to jump start organic growth at most middle market companies. They provide valuable assets such as customer portfolios and new product sets they can take years to accumulate on their own. They also bring teams of quality employees that have special skills not easily sourced in the labor markets.
The best business acquisition opportunities in 2014 can be found in old line businesses, such as distribution and service companies who are not fully monetizing the value of their customer accounts or product portfolios. For example, many companies have strong customer relationships selling a single service or product but are unable to expand their offerings to provide a fuller spectrum of product offerings. These companies lack innovation capability and more than likely lack visionary product design leadership in their organization. Some companies have hard to assemble product lines and offerings but lack the ability to bring these products into new channels such as federal government channels, new territories and online marketplaces. These companies often are steeped in product knowledge and customer service but lack the channel development vision. When a company's revenue levels off and an owner reaches a certain age, the probability of future growth diminishes.
The best sectors for business acquisition opportunity today are in the IT Consulting, Direct sales distribution and Healthcare service sectors. All of these sectors have experienced significant change over the past several years due. IT has gone from a localized consulting model to a cloud based offshore model. With the cloud becoming omnipresent, IT delivery channels have been structurally upended. Distribution companies that have historically used direct sales to drive growth are now dealing with adoption of new technologically based sales and marketing tools. Customer's today want to deal with fewer suppliers and are organizing managed purchasing platforms that may cut out certain suppliers. Most direct sales based distributors need to adopt new technologies such as skype, video conferencing and hand held tablets into their sales process to keep their sales force on the cutting edge. Health care companies particularly in the service side are under attack from technology and regulatory changes. Most health care service companies such as home care or outpatient practices have been run as lifestyle businesses. They are not equipped to deal with changes in reimbursement let alone large scale industry reorganization into accountable care organizations. While these sectors are all different, they all are wrestling with the same issue - how to become more efficient in a technology dominated world where the old fashioned way of doing things is no longer good enough. These sectors present the best business acquisition opportunities in 2014.
By Prashant SN