“If you can’t beat ’em, buy ’em”


That seems to be the plan as more US private businesses plan to increase growth through mergers and acquisitions in 2011 than 2010.

According to the Grant Thornton International Business Report (IBR), a third of senior-executive respondents said that their companies anticipate making an acquisition in the next three years, an increase of 8 percent compared to last year. In the US, 41 percent of private companies said that they plan to grow through acquisition in the next three years, up from 32 percent last year. Of those companies that plan to grow through acquisition, a full 100 percent said that they plan to do it through a domestic acquisition and an additional 28 percent said that they plan to do so via a cross-border purchase.

Why? Key drivers behind acquisitions plans are: To build scale (72 percent); access to new geographic markets (67 percent); acquire new technology or established brands (44 percent); and access to lower-cost operations (40 percent).

How? The two main ways that US private companies plan to finance their business growth in the next three years are through retained earnings (85 percent) and bank financing (61 percent). Only one out of five plan to use private-equity financing. Three percent plan an IPO.

International M&A outlook
Private companies in the BRIC economies (Brazil, Russia, India and China) are leading the way with 44 percent of respondents considering an acquisition, compared to only 27 percent in 2010. Driven by the desire to access new markets and acquire new technology or established brands, almost half of mainland China businesses plan to grow through acquisition, an increase of 19 percent over last year.

Likewise, Indian companies, which are well experienced in dealing with overseas M&A markets, are now back on the acquisition trail. Forty percent of those planning an acquisition in the next three years expect their deals to be cross-border.

My Thoughts: You know The Great Recession is over when everybody forgets (partially) how we got into this mess in the first place. The end result of any merger no matter the “key driver” is the loss of jobs. How does THAT help the overall economy? Once again, US businesses are using only short-term thinking. If they had used their own innovation (and people and resources) to create winning products for new markets, they wouldn’t have to buy out their competitors and put people out of work at the same time.

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