Enterprises see M&A as means to outclass rivals

Most entrepreneurs view mergers and acquisitions as an opportunity in the existing economic scenario, according to a survey.

They say this strategy can help a business outdo its competitors, said the Ernst & Young (E&Y) survey.

"These are the times when fortunes are made and new market leaders rise to the top. The focus of most entrepreneurs is to broaden their customer base or enter new markets. To achieve this, many see a marked increase in potential mergers and acquisitions at reduced prices," the research said.

The survey was conducted among 3,100 finalists of Ernst & Young's Entrepreneur of The Year programme selected from around the world.

The advice, according to E&Y, is cautious raising of capital together with a renewed focus on having the right balance sheet and business model to capture these acquisition opportunities. This focus has maintained the importance of divesting no-core assets to realise capital.

"Mergers and acquisitions together with looking at diverse new markets are today's great opportunities. Now is the time to take market share either through sales growth or acquisition. It is not for the faint-hearted, but there are few golden moments in history like this one to dominate your industry or your competitors," said E&Y.

The focus should be on divesting unprofitable units while seeking and investing in opportunities from the crisis," said entrepreneurs.

While 80 per cent are maintaining or increasing focus on seeking mergers and acquisitions, 74 per cent said they were maintaining or increasing focus on divesting non-core assets.



Look for financiers

"Preserve cash wherever possible without losing sight of what your goals were before the economic crisis hit," said E&Y. "Make sure that you have an ongoing dialogue with your banker and develop a realistic budget that reflects the current market conditions."

More than 80 per cent of the entrepreneurs surveyed said they were retaining or increasing focus on accessing alternative channels of capital. "Maintaining strong channels of understanding and communication with all key financiers continues to be a very important element of good financial management," said E&Y.

"The survey has confirmed that exit or succession planning saw little increase in focus — but accessing new or alternate channels of capital to capture opportunities is an increased focus."



Managing risk

While retaining a capacity for risk, entrepreneurs showed awarenesss toward of the heightened dangers that have appeared in the world economy in the past 12 months. There is a split over whether to increase or decrease exposure to risk – the majority have retained their encouragement and reward of measured risk-taking. Whatever the attitude to the taking of risks, there is an overwhelming recognition that companies need processes to recognize and deal with problems before they can threaten the strategic direction of the company, the advisory firm said.

"Majority of surveyed entrepreneurs have retained their encouragement and reward of measured risk-taking."

The entrepreneurs opined that calibrating business strategy to market conditions should not be ignored. "Plan ahead, don't make rash decisions. Winning companies acknowledge financial concerns before they become a burden and make swift decisions when they need to be made."