Word: smalls
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Dates: during 1990-1999
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...many other small-business owners, talk about building a new Oracle, pro or con, sounds roughly as relevant as chatter about a space cruise to Pluto. They consider mergers and acquisitions the only way not just to grow but sometimes even to stay afloat...
...With a small-business guy, it's a day-to-day struggle to survive," says Larry Mocha. He is president and owner of Air Power Systems Co., a Tulsa, Okla., maker of air cylinders and other parts for trucks that his father founded in 1964. At times, Mocha recalls, he had to borrow on his personal credit card to meet his payroll. A year ago, though, he bought the assets of a local machine shop whose owner was "tired of being a small businessman." The acquisition enabled Air Power to double its production capacity. Now Mocha is looking...
Mocha's comments point to another difference between little mergers and the monster variety (besides the obvious one of size). Although the conglomerate craze is waning, most big-time mergers still aim at a degree of diversification. But small firms almost always combine with others in the same industry. That, of course, frequently means mergers of direct competitors or potential competitors, like Personify and Anubis. But while trustbusters may try to stop such a merger between two giant competitors or at least attach onerous conditions, they are almost sure to ignore combinations of little competitors. It is difficult to imagine...
...There are almost no short-term cost savings [in a merger] if you do it right," says Fred Zimmerman. He has been on 16 company boards as a small businessman turned professor (of engineering and international management) at the University of St. Thomas in Minnesota. He counsels would-be acquirers to be prepared for an increase in expenditures beyond the price of the acquisition. Says Zimmerman: "You'll want to improve the [acquired] company because it's now your property. So you'll probably want to buy more equipment or expand distribution or develop a new product. These...
...which can make small-company combinations harder to arrange than big buyouts. John Mavredakis, senior manager of the Houlihan Lokey investment bank, has helped arrange both types. "When we work with large corporations, everything is methodical and rational," he says. "With smaller companies, emotions come much more into play. Personalities play a major role. There is the need of the entrepreneur, his desire to make sure that his employees are being treated fairly and that he is giving them a good home...