With all of the consolidation going on in the aerospace industry do you ever wonder if it is really best for the industry? Can a smaller independent company survive and prosper in this marketplace? If so, what is the strategy for the future?
Often small/mid-size business owners are faced with the decision of whether to participate in the merger mania. The thoughts that go through our minds and keep us awake at night revolve around three choices:
To acquire – to be acquired – or to hold the course and remain an independent company.
To Acquire: Typically a company requires outside capital to acquire another company and it involves risks. Outside capital can often lead to a loss of independence by being beholden to the investors whether it is a bank or a private equity firm. Conversely, a financially strong independent company can do the right things for the long term benefits of the company without the pressure of quarterly financial reporting. Quite often we all experience poor behavior by larger corporations doing whatever it takes to “make the quarter”. Personally, I do not want to be beholden to anyone, I want to do the right thing for the business long term.
I suppose another reason that holds some companies back from acquisition mode is that it requires a different set of skills and a deep bench of capable managers to properly manage and integrate the new organization. Typically, we are confident of our ability for organic growth in the existing business, but can find it daunting to enter into an entirely different organization and culture.
To be Acquired: At times it can be tempting to consider being acquired. Market pressures sometimes make you concerned that your company will get shut out of access to the market. Other pressures are the increasing needs for sophisticated business systems – It used to be that you just needed to be good at manufacturing to be successful. Now you need to manage complex systems in ERP, process control, PPAP, etc. in addition to being world class in manufacturing. Combine that with the constant pressure to capitalize in order to keep up with the latest technology and you start to understand why so many companies decide to sell or merge with a larger organization.
Remaining Independent: Remaining independent is the correct course for many companies who recognize the pressures of the market and develop the right strategy. Typically it seems that these companies are experts in a focused product – one of the best in the world at what they do. They also develop a broad customer base and provide the customer with a total service of supplying assemblies and kits (not just parts).
So, in considering the various options you have to ask the question – is bigger really better? I don’t think so…… and certainly not just for the sake of being bigger.
The topic makes me reflect on what has gone on in other industries. For example, when the big box stores (Home Depot,etc.) first came out, I have to admit I was intrigued with everything under one roof. But, over the past few years I have begun to hate going to them……I never go to Home Depot anymore.
I finally stopped going when the service got so bad that they made me do my own check out with no one to help me. Why go there when I get just as good pricing and far better service at my local hardware store. The people are knowledgeable and the service is great!
I think the same thing is beginning to happen in our industry. Have you dealt with a large, bureaucratic, non-responsive company recently? Perhaps there is still a place for independent companies that are highly responsive, high tech, lean leaders in a focused product.