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 healthy companies out there looking for ways to reposition themselves. And they are eager to take advantage of the lower valuations the changed environment has brought. Those that have fire in the belly are taking action to grow.
The mode of growth has shifted, however. With the debt world crumbling and the flow of private equity almost dried up, creative executives are looking at alternatives to the traditional acquisition. Minority ownerships, joint ventures, strategic alliances… Reviewing multiple paths to external growth is part of the Capstone strategic process, so it’s interesting to see this trend emerging in the market at large.
One force that’s noticeable is the pressure from end-customers for consolidated solutions. They are increasingly impatient with dealing with multiple vendors. This creates the opportunity to become the preferred solution-provider, assuming you can team up fwith one or several other partners to offer a one-stop solution to the customer.
It often takes vision at the CEO level to see these larger opportunities. I have been dealing with a couple of clients recently that have two or three successful lines of business running. There is no obvious problem with any of these lines, but the question comes up: “How do we rise to the next level?” That requires looking across and beyond the current lines to see what is possible through creative union with other players.