Reports show that across Australia and New Zealand industries there is a continuing rise in merger and acquisition transactions for the first nine months of 2015. The level of activity is high despite a slowing in mining and metals industry deals. Many of the replacement mergers and acquisitions are coming from high tech.
This follows 2014 which was a boom year for M&A in Australia with very high levels of activity.
Within the recruitment industry certain types of companies are in demand and international buyers’ appetite for Australian recruitment companies is increasing. But such is not the case for every company in the industry.
Larger businesses can be attractive to overseas buyers as they can reduce risk and ‘move the dial’ with their impact. If the acquiring company is based a long way from Australia (especially in North America or the UK) then acquiring a company that has strong corporate attributes and a sustainable size reduces the risk significantly.
Smaller companies, if they can demonstrate their niche strength and strategic value, are also very much in demand in the region. We have all commented on the massive changes to the industry and the need for companies to move on from their methods and processes of the past. Acquiring a smaller company that has a demonstrable strategy for the future has the potential to transform the acquirer.
Related: Dealing With The Constant Called “Change”
Acquisitions by Recruit and OutSourcing Inc, both from Japan, have grabbed the headlines but there are a number of other transactions that have been completed in Australia by international buyers.
Buyers want to acquire businesses that they understand and that have a model that they have confidence in. They are certainly looking for a value proposition.
Future growth and strategic development are two key attributes that they always will be inclined towards. To fulfil these expectations, there must be some repeatability or continuity of revenue.
Buyers are better at assessing risk, management and the quality of earnings – the key ‘deal breakers’ haven’t changed over time.
Business owners and managers need to be able to put themselves in the shoes of the acquirer to be able to fully understand their own business. Characteristics that are valued by the owner, or are seen as important, may be assessed very differently by an acquirer. As an example, many business owners in Australia are proud of their involvement and influence in the core sales and delivery functions of the business. But for an acquirer this is a sign of weakness in the organisation as it shows a reliance on the founders that is detrimental to longer term sustainability.
Recruitment companies, in order to be more attractive to international buyers, need to be able to articulate the compelling investment opportunities. Being more strategic; more corporate, with good governance and a well-designed management process will position the company correctly.
This also applies when presenting to potential Australian acquirers. There are frustrated buyers in Australia that are having trouble progressing acquisition plans.
All business owners, large and small, should be in a state of perpetual readiness for an approach from an acquirer. You only get one chance to make that positive first impression.
An up-to-date business strategy, progress on improving the business, clean and current financial accounts, and an engaged workforce are essential.
It is equally important for the business owner to have their corporate goals and personal goals clearly identified so that decision making is possible. When an approach is made that is not the right time to consider a potential life after the business. Life decisions should not be made quickly or when under pressure.
Good businesses are rewarded when under the hot bright lights of an acquisition process. A realistic assessment of the strengths, weaknesses and value of your business might be the starting place to ensure you can take advantage of the current positive M&A market.
Article written by Rod Hore and originally published in Global Recruiter September 2015