I spend a lot of time thinking about the M&A industry. Many of us have been deal makers in recent history and we all now work closely with many M&A firms on a day to day basis. It is an interesting position to be in – to learn through the observance of many firms, what works and what doesn’t work in the space. Our new Strategies group’s sole charter is to take what we defined as best operating practices in M&A and apply them to our client’s firms.
I have always found it a bit ironic that there is very little M&A activity within the M&A industry. I believe this is based on a lack of firms that have transferable, scalable, and predictable business models. We all know that these factors kill M&A deals in every other space, why would our own industry be very different?
M&A firms can be built to scale, use well proven technology, generate predictable leads, and strive for consistency in close rates, most just don’t do it.
Building an M&A firm to this spec is relatively expensive and takes principals who understand that investing in good strategy, tools, and design can quantifiably increase their business’ value and capacity in the long run. Outside of the cost, M&A is an industry with very few barriers to entry. That said, almost anyone can try to do a deal (but only the real pros can actually close that deal). With such an open door to the industry, it is no wonder that there is a high number of firms without a sound strategy or structure, as it would be in any industry.
What is an M&A firm at its core? It is a financial services company, a small service business, or at its core, a small business. Other small services companies get bought and sold all the time based on the value they have proven over years of operations. I run and co-own a service company (CAPTARGET) and it will be bought and sold some day. We are not much different than the clients that we serve (except that we have addressed some of these strategies and structural concerns already).
So why Strategies? I explain by saying to all you deal makers out there what you say to your clients. Every business owner needs to run their business today like it was being sold tomorrow – and make no mistake, M&A firms are not an exception to this rule.