Strategic Mergers & Acquisition: Seeking a solution to a business problem
An Entrepreneur’s Mind
My time in and around the business world dates back to when I was young. When I was 18 years old, I would organize social events and sell tickets to classmates and friends. They were humble beginnings, but it was exciting, and I was inspired by the success I was achieving. This inspiration led to an interest in expanding my skills into the world of business, and so the next step in my growth was getting some real world experience – selling products door to door – and then entering university. University was where I needed to be at the time, but not where I wanted this journey to end. Upon completion of my post-secondary studies, I worked for an engineering company, as well as IBM, for a few years, honing my skills. Eventually, I took all that I learned to open a language school – The Jordan Language School in 1993. Everything that I had done up to this point had prepared me for where I needed to be mentally. Using the skills and focus that I had honed over many years, we ended our first year with 75 students. By the end of the second year, we had more than doubled that total, with 200 students.
My Investment Experience
But it wasn’t just our client base that was growing. After three years, our total revenue was $3.5 million dollars. We decided that the time was right to acquire one or two more language schools in strategic locations, such as Southern or Centrel Taiwan. And we did acquire two schools in 1995, which we started to manage immediately.
Mergers and Acquisitions as Part of Business Growth Strategy
You may be wondering now, how did I go about acquiring these schools? And how did I ensure that they would remain profitable?
The key lies in developing a strong acquisition strategy
A successful acquisition is built on successful planning, and understanding the steps to completion:
1. Set the M&A criteria
2. Search for acquisition targets
3. Begin acquisition planning
4. Perform valuation analysis
5. Negotiation – After a view on valuation has been established an offer can be made and negotiations will go back and forth
6. M&A due diligence – Once an offer has been accepted it will be subject to due diligence, a process of confirming that all information about the target is accurate
7. Purchase and sale contracts – Upon successful completion of due diligence the final purchase and sale agreement can be signed (share purchase or asset purchase)
8. Financing strategy for the acquisition – This step may occur earlier, but the final strokes of financing will come into place after the deal has been signed but before it closes
9. Closing and integration of the acquisition – Finally, the official transaction closes and the long process of integration begins
Acquired two schools
The first school:
We purchased the first school in Southern Taiwan. The owner was asking for $900,000, however the valuation showed that the business was actually worth closer to $600,000. Since the owner was retiring, we were able to negotiate a closing deal of $500,000.
Closing the deal at that price could already be considered a win, but there were other advantages to purchasing this specific business as well. The clientbase was already 150 students strong, however since this school was beside two other schools, there was the potential for the number of students to double in the first year alone.
The second school:
The second school was located in central Taiwan. The owner was asking for $700,000, but the valuation revealed the value of the business was closer to $300,000. We investigated what might be causing such a large gap between what the owner expects and what the reality is, and discovered that poor management and a poor school image led to the school’s value not reaching its potential. It was also the reason why the owner was losing money and was interested in selling in the first place.
By closing the deal at $300,000, we were then able to immediately work on improving the management team, renovating the school (a cost of $50,000), and rebranding the school.
Improving these areas led to immediate advantages, as we were able to more effectively take advantage of the school’s high traffic, downtown location, allowing us to establish out client base as high net residential households, with overseas collaborations in the summer.
Passionate About Business Growth Strategy of Mergers and Acquisitions and Investment Opportunities
As a Certified Mergers & Acquisitions Professional, I aim to help business owners with my company, CTL Business Group. I am passionate about ensuring the success of businesses in all areas, such as exit planning, mergers & acquisition strategy, investment planning, business consulting, valuations, corporate finance planning, and business training.
Our focus is on two different transaction levels – $500,000 – $1 million, and $5 million to $50 million+. We work on middle market deals in areas such as healthcare, technology, consumer products/services, professional services, real estate, retail, manufacturing, and material & industry. Our investors are always looking for profitable businesses to invest in, and we have successfully closed several deals in the past. See our Success Stories on our website here:
http://usa.ctlconsulting.com/success-stories/
Mergers and acquisitions have become a popular business strategy for companies looking to expand into new markets or territories. Not only does it afford them a competitive edge, but it also helps in acquiring new technologies and skill sets. They are especially popular in the professional services space, with the growing wave of retiring Baby Boomers, combined with a rapidly changing economy and marketplace.
So what is the impact of all these mergers? More specifically, does a merger or acquisition make sense for you firm?
How to Create a High Growth, High Value Professional Services Firm
We have spent several years researching the business success of high growth, high value firms, and how your management team can begin implementing high growth, high value practices. Have you ever wondered how some professional service firms are able to grow so quickly and generate remarkable value year over year? With our expertise, we will help your business go even further, and lay out a roadmap to achieve similar, if not superior results.
These are questions for you to consider:
- Do you know what your business worth is?
- Do you know how to increase your business value?
- Do you have an Exit Plan when you start up your business?
- Do you know about Cross-Border Mergers & Acquisitions Strategies?
- Do you know what the right businesses to invest in are?
- Do you know how you can reduce your transaction costs?
- Do you know about outsourcing to an M&A expert?
A Smart Mergers & Acquisitions Strategy can Speed up your Business Growth
Deal-making can be a lot more complicated than executives predict, and studies say that 70% to 90% percent mergers fail to meet the long-run financial goals they were drawn up to fulfill.
We want to hear what you think. Please email to me if you want to discuss with me. CTL Business Group: info@ctlinternational.ca
About the author:
Maggie Chen, Certified Management Consultant; Certified Mergers & Acquisitions; Founder/CEO at CTL Business Group – Canada, USA & Taiwan
Buying/Selling Business; Mergers & Acquisitions; Business Valuations; Business Consultations; Corporate Finance; Investment; Business Training
Telephone: 1-800-301-6817; 587-3538067; 626-8176526; 02-27056845
CTL Business Group Canada, USA and Taiwan: www.ctlinternational.ca
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