The age old mantra of “buying low and selling high” is the basis for making money on any transaction including an M&A deal. However, there is a difference in perspective if you are a day trader or a house flipper versus buying something to generate substantial long term value. For instance, sensitivity to purchase price is going to be very different for someone buying an investment property versus a buyer looking for a home to live in for many years. There are a lot of great reasons to build value in your business through an M&A deal. Yet too many get wrapped up the in the M&A transaction and thwart the very value they are trying to build. With excellent decision making, an M&A can be a solid bet to build long term value in your venture as long as you remember that closing an M&A deal gets you to the starting line not the finish line.
Smart M&A means thinking beyond the transaction
- Buy low sell high…general mantra for making money, but there’s a difference in philosophy if you are a day trader or a house flipper versus buying something to generate substantial long term value.
- Discount stores…cost of inventory management…cost to your overall product
- No one likes to be discounted
Don’t forget something is worth what someone is willing to pay for it http://unapologeticcapitalist.com/value-is-in-the-eye-of-the-buyerremember-narcissus-icarus-both-died/
- Some are so terrified of buyer’s remorse that they walk away from otherwise excellent M&A deals
- Do not to ever make a fear based decision.
- If you are the buyer and if there is value to be had, then place your bet. Bet on yourself that you can create something of excellent value with this M&A transaction
Know why you are getting involved in M&A deal
- Know the long term expected value of the M&A deal
- Know the red flags that are deal breakers right up front
- Do not buy just to ensure a competitor doesn’t
- Negotiate M&A terms based on the expected future value not on pinching pennies today
Know that the M&A transaction completion is the STARTING line NOT the finish line.