I once had a client that made fish products for manufacturers who in turn created packaged delicacies for the end consumer. My client was tempted at one stage to drift into making consumer products themselves. But they had absolutely no experience or competence in this area. It seemed just a step away, but actually there […]

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Here’s one principle that Capstone lives by in its work with growing clients. Before you go buying someone else’s company, be sure you fully understand your own. This requires asking a few simple but powerful questions, such as: “What is your core competency?” Companies, like people, often have mistaken ideas about where they truly excel. […]

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Why do stock market investors sell when prices collapse and buy when prices soar? Why do real estate owners display the same irrational behavior? The math is hardly difficult. It’s better to buy when valuations are low and sell when they are high. Yet human nature seems to require that we run with the market […]

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Officially, there’s been a drop of some 27% in M&A deals in the past year. In reality, this number is skewed by the large deals. In the markets where Capstone plays — mostly deals under $1 billion — there is a drop in activity but not to this catastrophic degree. There are still plenty of […]

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Here’s a recent exchange between the two principals in an acquisition we are advising on. Seller to buyer, “So what’s your exit strategy?”  An odd moment in the circumstances. Usually, the last thing M&A buyers have on their minds is offloading the newly combined entity. Seems a bit like talking about divorce at a wedding. […]

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In my last post I commented on the opportunity that has risen in the mid-market with the concentration of investment banking focus on major deals. There’s a chance for third-party advisors like Capstone to do more than fill the vacuum recent events have created. However, it’s important to understand what the gap really is — […]

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If you’re thinking of buying another company, the scale of your projected acquisition is an important question you need to settle early on. Your objective is growth, and it would be easy to deduce from this that the bigger your purchase, the better. Not so. You’ve heard the familiar question, “How do you eat an […]

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When it comes to funding acquisitions, banks are still holding tight to their money — unless you count the special case of banks buying other banks, which is causing quite a stir in the wake of the government bailout. The fact is, this is still a tough time for M&A, especially in what I have […]

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Writing this post on November 5th, one is bound to be thinking about the outlook for M&A under a new Democratic government. The people I do business with are looking at two major unknowns: tax and regulation. Both are cause for concern as the political map gets redrawn, and both may have a depressing effect […]

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Watch out for one defensive M&A strategy in times of financial stress. Instead of selling, weaker companies under threat may seek mergers with other victims of the crisis. Expect to see quiet talks between struggling competitors, looking for ways to wring out the costs and create a new, stronger entity.

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A short while ago, banks were pressuring struggling companies and seemed only too eager to move them into the “distressed” category, or effectively force them to sell. Recently, there’s been a dramatic reversal of attitude. The last things banks want on their hands is a host of collapsing companies. So you’ll find a very liberal […]

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I’ve noticed some company buyers willfully slowing down the acquisition process at this time. Why? They smell bankruptcy in the air. The longer they can string out the negotiations, the more desperate the seller’s condition and the lower the price. It’s tough for sellers to defend themselves in this environment. I’ve noticed some company buyers willfully slowing […]

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What I called “the wedge” in my post, The Wedge: M&A from $1B – $10B, is the natural hunting ground of private equity. And this is where we can expect the least activity during a crisis of credit. These buyers hate to put in 100% equity. They like a good measure of debt in the […]

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In every crisis there are winners as well as losers. Today companies seeking growth through acquisition can pick up bargains — if they have the cash. Small, over-leveraged companies are choosing to sell rather than go to the wall. As for the publicly traded corporations, they are under pressure from shareholders to get out of […]

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A common error in the M&A game is to over-delegate the process to the financial team. I had a highly successful client who put an entire acquisition in the hands of his CFO. Like many (but not all) of his kind, this financial executive could only see or understand spreadsheets. He had zero patience for […]

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There is an old way and a new way to go about the M&A process, and it’s essential to know the difference. I had a client that perfectly exemplified the old way. She would be regularly approached by investment bankers hawking “the book” on a company they had for sale. She would listen to the […]

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The right acquisition can dramatically accelerate your company’s growth. Sadly, great opportunities are widely missed, especially in the mid-market. Many companies shy away because the whole field of M&A seems too intimidating. There are others who attempt acquisitions and are disappointed by the outcome, often because they try to follow a rote system overly focused […]

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This isn’t the time to be down on private equity. They aren’t the bad guys and they brought a lot of value to companies in recent years. But the growth economics have changed. Private equity buyers have wrung out much of the financial value from these companies. When it comes to business acquisitions, it’s time […]

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Much of the buildup that’s been happening over recent years in the residential mortgage market is similar to what has been going on in the commercial market. It’s all about financial engineering. Typically, the financial investor looks at an acquisition and says: “Let’s restructure the balance sheet so that the company doesn’t fundamentally change. We […]

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When the smoke clears and the dust settles, what does the Wall Street meltdown mean? We’re back to cash is king. The Golden Rule has been restored: he who has the gold, makes the rules. It’s a return to old-fashioned investing. Companies with strong balance sheets and lots of cash are moving in to make […]

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