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Growing your business during the M&A frenzy

Not planning to sell your business? You still need to take action, writes Bob Cronin of The Open Approach

M&A is about change, innovation and growth. Acquirers buy where there’s opportunity – and a healthy return on investment. The current M&A frenzy in labels and packaging underscores the potential of our industry. It also portends its rapid and continued transformation.

While you can cash in on today’s high multiples, you may wish to hold on. But staying in charge doesn’t mean ‘staying put’. Accelerated M&A activity brings new dynamics, offerings and expectations. The reality of today’s fast-paced landscape is that you can’t survive by doing nothing. 

Even if you’re thriving now, things can be radically different soon. If you stay, you need to take action. Here are four key areas to focus on: 

1. Your position – To best prepare for the future, you need to know where you stand today. What is the status of your business? What are your strengths? How are you positioned amongst your competitors? 

Labels is a market driven by innovation, delivering products that help businesses stand out. Your capabilities are a huge consideration. But beyond manufacturing, the most valuable vendors are the ones that add value. 

To position a company today, you need to look at your platform and see how it fits with your customer base. If you specialize in pharmaceutical labels, you may need a totally different set of tools than when serving clients in food packaging, beverages or retail products. You may also need certifications, reviews, or third-party assurances. Select what’s best to make sure your customer sees you as a resource – now and in the long term. 

Gather with your key players from sales, operations, finance, and customer service and have an open conversation on your strengths and weaknesses. Discuss where you thrive and where you’re falling short. Analyze lost projects, and more important, lost accounts. It’s not just about what you think; it’s about how you’re perceived. It always comes down to ‘the customer is right’ whether you like it or not. 

2. Your moves for the future – The best companies spend less time worrying about what they’re doing today and more about preparing for the future. Preparing your company should be an ongoing activity. Business will continue to change, and you’ll need to adjust accordingly. Concentrate on your three greatest focal points: capital, staff and competition. But before you begin strategizing, understand your own willingness to take on the challenges in these areas over the next five or ten years. (If you get stuck here, you might want to revisit a consideration to sell.) 

First, think through how much you will want to invest, and from where it will be best to get funds. What types of funding, rates and sources are available to you? The economy will always impact planning. Next, look at the skills of your staff and where you need to build or cross-train. How solid is your team, and how well-equipped are they to take you into the future? Finally, examine your competitors – not just the current ones, but those forming via M&A. How are they gaining traction? Do theyhave the financial power to usurp your business, as private equity may? Regardless of whom you compete with, it’s imperative to understand their trajectory so you can decide how best to carve out your advantage. 

3. Your funding plans and opportunities – If your best use of new money is to retire to Florida, then by all means do so. But if you’re looking to stay, you need to assess your financial opportunities. Ask yourself two questions: 1) What would be the single most lucrative addition to your company – equipment, acquisition, systems, capabilities? And 2) Do you have the talent to execute it? Aligning your funds in this way will ensure your greatest success. 

At the core, capital expenditures (like M&A) are about growth and change. While entrepreneurs often talk about industry revolutions, most find it difficult to adapt to new dynamics. But keep in mind that if you’ve run your business for 10 years or more, you’ve already adapted to some of the greatest and most dramatic changes ever seen. 

4. Your targets and timelines – The final decision about your business is up to you. You’ve reviewed what it will take to thrive. Now, you need to set goals and schedules for their accomplishment. Determine your best pathways, and select the people, processes, and procedures to succeed. Don’t be afraid of adding, subtracting, augmenting or supplementing what’s needed. 

We tell our clients ‘You sell your business only once’. You must make the best deal at the time it’s presented. It’s the same idea when you’re keeping it. Do what you can to ensure your prosperity. What you have today may not be what you have tomorrow. Strategize for your future, and enlist an advisor to help you unlock every opportunity. Buy, sell, merge or stay in place. There is abundant opportunity to capitalize on the plan that fits you best.

This Opinion was first published in Labels & Labeling issue 3, 2018.

ABOUT THE AUTHOR

Bob Cronin is a regular columnist in Labels & Labeling, writing about M&A activity in the industry.

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