How mergers and acquisitions are solving some of today's business challenges

As the pandemic has evolved, so have its effects on nearly every corner of society. One of the most interesting and perhaps surprising Covid impacts on business has been in the area of mergers and acquisitions.

According to KPMG, M&A transactions in the United States totaled $2.9 trillion in 2021, up from $1.9 trillion in 2020. Deal valuations continued to rise to new highs in 2021 as well. Looking forward, more than 80 percent of executives expect valuations to rise further in their industries in 2022. More than a third of executives expect valuations to climb by at least 10 percent in 2022.

Is it a great time to enact your business’s exit strategy? Perhaps. But it’s also a good time for growing companies to expand their M&A horizons. 

Here are a few examples of how some businesses solve pandemic-related challenges with M&A. 

A solution for labor shortages

With 12 to 15% percent shortfalls in labor, talent acquisition can be a fringe benefit of a well-conceived M&A deal. One type of synergy from M&A is talent acquisition which gets the combined business closer to full staffing.

Labor shouldn't be the primary reason for buying another business. Acquisitions have to make strategic sense from an overall perspective. 

A rebuild-and-recover strategy 

By easing staffing shortages, M&A can address other areas such as cash flow. For example, insufficient staff in the accounting office can impact the timing of accounts payable and accounts receivable transactions. Delays in paperwork can cause other setbacks: For example, an auto dealership may have more trouble acquiring vehicles or quickly getting cars into the hands of consumers. 

An answer to supply chain disruption 

M&A is an opportunity for some companies to expand into other channels. For example, some beer, wine, and other alcohol distributors are using M&A to diversify to replace the revenue they lost when on-premises sales were suspended.

Some companies purchase their distribution channels to control the supply chain better. 

An exit strategy for private owners 

Some owners are exiting their businesses sooner than they might have planned pre-pandemic.

It has been a tough couple of years for many businesses, and for some, the impacts of the pandemic are still ongoing. We believe this and other factors have driven significant M&A activity in recent months. 

An inspiration for transition planning 

With so much capital being infused into the markets, it pays to be prepared for unsolicited inquiries, even if you’re not currently entertaining offers. 

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A good starting point is to obtain a current business valuation. The business purchase timeline has accelerated drastically, which makes it essential to have a good idea of the value of your business before you find yourself weighing an offer.

In the meantime, focus on building a culture of continuous improvement and business growth. By keeping a future transaction in mind and being prepared for it you’ll be ready to act fast when the time is right.

What’s possible in M&A for your business?