Into the Fold: Acquisitions and the Financial Benefits of Fold-Ins

In early December, the Wall Street Journal proclaimed 2015 the biggest year ever in the U.S. for mergers and acquisitions.

At home, Canadian companies have been turning their attention to the domestic market with 66% of respondents in an October Ernst and Young Global Limited survey identifying the Canadian market as their primary focus for M&A. Some 57% were focused on cost reduction and operational efficiency—up from 31% one year prior—consistent with what our offices are seeing.

Cost reduction and operational efficiency

In November I attended the 2015 conference of the International Business Brokers Association (IBBA) in Santa Fe, New Mexico.

One of their Canadian market sessions was a timely mastermind on acquisitions and the financial benefits of fold-ins or add-ons.

Businesses commonly seek complementary acquisitions that can be added on or folded into their existing operations. These deals often generate high margins due to synergies that allow the buyer to add on the revenue of the acquisition without the costs the seller (and their smaller business) had. Rent, administration and marketing costs disappear, and the marketing clout of the buyer changes from break-even into a huge success. And a business that might be considered unsaleable becomes advantageous to a larger player who could benefit from access to your client base, a new market segment, specialized tools, team skills, or many other considerations.

With a low dollar, Canadian businesses look very attractive to international investors looking for add-ons, particularly those in the U.S., making Canada a healthy deal market.

Is your business positioned for sale? Should it be?

Request a no-charge confidential consultation with a business broker at an office near you.