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BusinessColumnistsJamie Herzlich

Small Business: Could a merger or acquisition help your business?

A decision to try to grow a business

A decision to try to grow a business through mergers or acquisitions is a delicate matter taking do diligence, experts advise. Credit: iStock

For many companies, the quickest way to grow is through a merger or acquisition.

Often, it enables a company to instantly expand its talent pool, product line or market reach.

And with economic conditions improving, now may be a prime time to consider an acquisition or merger -- provided you do your due diligence, say experts.

"The demand from acquirers is as hot as I've ever seen," says Bill Snow, managing director at Jordan, Knauff & Co., a Chicago investment banking firm and author of "Mergers & Acquisitions for Dummies" (Wiley; $24.99). "Our system has excessive levels of liquidity, and that is helping create today's high valuations."

In part, lower interest rates and three rounds of "monetary easing" in the wake of the 2008 financial crisis have helped fuel the M&A market, Snow says.

Global M&A volume reached $2.80 trillion in the first nine months of 2014, up 34 percent over the same period last year, according to Manhattan-based Dealogic.

Locally, "the inquiries we've had are three times the rate we've had over the last two years," says Anthony Citrolo, managing partner of Woodbury-based New York Business Brokerage and Strategic Merger & Acquisition Advisors.

"It's very difficult to grow organically," Citrolo notes, so for many companies a merger or acquisition provides a good vehicle for growth.

But that doesn't mean you should just jump into it.

For starters,assess what you want from a potential acquisition or merger, says Snow. Are you looking to grow market share, take out a competitor, or have a new product to sell?

Then, "do a self-check of your own company," advises George Hubner, president of Landmark Business Ventures, a Hauppauge-based mergers and acquisitions adviser.

"Look at your own strengths and weaknesses," Hubner says, and then consider looking for a company with strengths and weaknesses that offset yours.

If you find a potential partner, don't just fall in love at first sight, he notes. Give the quality of its earnings a close look, along with customer concentration, accounts receivable and inventory, notes Snow. For example, is the inventory obsolete? Is the company collecting its receivables?

You also need to look at the cultures of the two companies.

"I think a lot of times, they don't take culture into account," says Joseph Boyce, co-founding partner of CondeBoyce LLP, a recently merged accounting firm in Jericho.

This past June, Boyce's firm, Joseph Boyce, CPA, merged with the practice of co-founding partner Mario Conde, formerly of Ambrico & Conde in Deer Park. Two months later, they acquired the majority of the accounts of Mario's former partner, Louis Ambrico.

Boyce and Conde had worked together at another firm in the past and had kept in touch throughout the years, says Conde, adding the timing was right to merge.

"We saw an opportunity in the marketplace," he notes, adding their combined specialties include outsourced chief financial officer services for hedge funds, startup services and mergers and acquisitions work.

The two colleagues had a working history, which helped. "We knew our styles and personalities," says Boyce.

The combination of firms was an equal merger, say Boyce and Conde, but that's not always the case.

"Most mergers are really acquisitions," says Citrolo. "There's a bigger player and a smaller player."

That's why you need an integration plan and clearly defined roles and expectations, he notes.

Otherwise, it can spell disaster.

"It can be worse than a bad marriage, except the company divorce can be way more expensive," he says.

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