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3 M&A Trends Middle Market Companies Should Be Watching Closely


Strong job growth and rising interest rates are not the only signs that the United States economy is humming along nicely. There is also record-breaking merger and acquisition (M&A) activity in North America. 

Strong job growth and rising interest rates are not the only signs that the United States economy is humming along nicely: There is also record-breaking merger and acquisition (M&A) activity in North America.

If M&A is part of your middle-market company growth strategy, here are three top trends to watch:

A generational shift in consumer base is driving innovation

It’s no surprise that today’s consumers have vastly different preferences and demands than previous generations. Millennials—a generation present for the birth of Facebook, Instagram, and Amazon Prime—are approaching their 30s, and amassing real buying power as they mature. You may need to adopt new technologies and expand beyond your core into adjacent markets in order to speak to evolving consumer patterns.

If approached with the proper mindset, however, those adjustments may pay major dividends down the road: Investing in innovation can help your company remain nimble as disruptors continue to enter the market.

Coca-Cola’s recent $5.1 billion acquisition of British coffee chain Costa Coffee is an example. By entering the fast-growing category of coffee shops, Coca-Cola not only now has a strong coffee platform in Europe—Costa Coffee currently operates more than 1,000 stores across 31 countries—but also acquired access to Costa’s coffee sourcing, vending and distribution expertise.

As health-conscious consumers’ appetite for sugary drinks declines, Coca-Cola has positioned itself for potential future growth through an investment in an on-trend business with baked-in scalability.

Competition is an opportunity to find newer, better ways to thrive

With technology lowering the barrier to entry and expanding avenues to the customer, long-standing businesses won’t necessarily be able to stay in the game if a new company comes along that can do the same thing better, faster and stronger.

Case in point: It has now been more than a year since the acquisition heard ‘round the world. Amazon’s purchase of Whole Foods reverberated throughout the entire middle market. We’re now seeing how companies have reacted to remain competitive — some in surprising and unforeseen ways.

Take Sprouts Farmers Market, for example: Approximately six months after the Amazon-Whole Foods deal the supermarket chain—which specializes in natural, organic and gluten-free foods—announced a partnership with grocery delivery technology company Instacart, initially sending its stock soaring 5%.

The smart takeaway? The Whole Foods and Amazon deal was a wake-up call, but it was also an opportunity to innovate and adapt. The grocery industry shake-up led some competitors to emerge stronger.

The rise in private capital is offering new opportunities for growth

Options for growth these days go beyond going public or selling your business. Though there are still plenty of auction-based deals, private equity offers the opportunity to partner with a firm that is potentially better aligned with your strategic objectives.

Private capital is especially attractive for companies undergoing a major transformation. Selling in the public market, which tends to be short-term focused, presents many challenges, not least of which is that buyers want to see immediate results. Forge the right partnership with a private investor or firm, and you gain not only capital to expand your business, but also valuable expertise to redirect course.

Roark Capital is the private equity firm with a focus on fast-casual dining, perhaps best known for purchasing and turning around then-struggling fast food chain Arby’s in 2011.

Last year, Roark acquired Buffalo Wild Wings for $2.9 billion. Foundationals weren’t pretty. Once the darling in the fast-casual sports bar category, the chain had been struggling to attract millennial diners. Sales were down across its franchises. The company needed not just to grow, but to execute a directional change in strategy.

As a majority owner in Arby’s, Roark Capital diversified the fast food chain’s offerings to bring younger customers in the door. Now, with its vast restaurant expertise, critical insight, and keen understanding of fast casual consumers, Roark is set to help Buffalo Wild Wings revamp its image to appeal to a new generation of diners.

Across all these trends, one thing is clear: Growth requires change.

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